We debunk the most common myths about Direct Debit

It’s been a British institution since the 1960s, but in the last half century, Direct Debit has gone from clunky and paper-based, to sleek, slick and simple. In this post, we’ll clear up some common misconceptions around Direct Debit, giving you the latest on the UK’s most popular method for collecting recurring payments.

Myth 1: Gaining access to Direct Debit is difficult

In the past, you could only access Direct Debit directly, through your bank. The process was (and still is in some cases) slow and required significant effort and expense for the person applying - in both setup and ongoing management.

For large businesses with high transaction volumes, who can meet the revenue criteria of banks and who don’t mind hiring people to manage the process (and sourcing their own software), direct access may still be the preferred route.

But today, there's a simpler way to access Direct Debit - indirectly, via a bureau that manages the Direct Debit process with the bank on your behalf. Bureaus like GoCardless provide an online plug-in-and-go service, significantly reducing setup time and cost, as well as ongoing management and admin.

Myth 2: Direct Debit is unsafe


Thanks to the Direct Debit Guarantee, the Direct Debit method of bank-to-bank payments is the UK’s safest payment method, making it an attractive payment option for your customers. The Direct Debit Guarantee requires merchants to give advance notice of payment collection and allows customers to cancel a Direct Debit mandate at any time and receive a fast refund for  payments mistakenly taken (often called ‘chargebacks’ or ‘indemnity claims’).

While the Direct Debit Guarantee protects customers, GoCardless also works to protect merchants from fraudulent chargebacks, for example by putting limits on high-risk transactions.   

When it comes to security of financial data, GoCardless is regulated by Financial Conduct Authority and the Payments Service Regulator. We are also certified by ISO27001 to ensure we offer the most secure service for our merchants and their customers. Our security features include ‘tokenising’ payment data so merchants don’t have to store it themselves.

Myth 3: Direct Debit is inflexible

There is a misunderstanding at the heart of this myth. Standing orders and Direct Debit are often confused as they both involve bank-to-bank payments. When it comes to flexibility however, the two couldn’t be more different.

Unlike standing orders, Direct Debit allows you to take both fixed and variable monthly payments, to amend collection dates and even arrange for one-off payments. Some bureaus offer even more flexibility in the form of multiple plans for certain customers and by integrating into billing or CRM systems.

Myth 4: Direct Debit is paper-based and admin heavy

If your Direct Debit process is paper-based and admin heavy, you should be looking for a different solution. Thanks to new technology and innovative suppliers in the market, Direct  Debit doesn’t need to be difficult or slow any more.

Bureaus like GoCardless allow customers to create Direct Debit mandates online - and once you have received a Direct Debit mandate from your customer, it won’t expire unless they change their bank account. A Direct Debit mandate can be for life!

Bureaus like GoCardless also provide automatic reconciliation, immediate plain-English failure reports and automatic retries to keep admin hours to a minimum.  

Myth 5: Direct Debit is expensive

Direct Debit is one of the cheapest methods to collect recurring payments.

Opting to collect recurring payments with credit or debit cards can mean a double blow of higher costs per transaction (typically 2.5-5%)  and higher payment failures, due to card expiration.

Costs associated with using Direct Debit bureaus vary by provider. GoCardless aims to keep Direct Debit accessible and affordable for your business with free setup and transaction fees of 1%, with a cap of £2 and minimum of 20p.  

Direct Debit for the digital age

There we have it, our top 5 Direct Debit myths debunked! Hopefully you’ll agree that it’s easy to see why 75% of all recurring payments in the UK are made by Direct Debit.

At GoCardless, we’ve brought Direct Debit into the digital age and made it accessible to all - and we’ll continue to invest in our unique Direct Debit technology to make sure it stays the best way for businesses to collect recurring payments.