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Your website CAN collect Direct Debit payments digitally online!


This blog post was written a few years ago and was published on the website of the company I worked for then. Sadly, the company no longer exists so I have posted it here as it is still relevant

There are very few briefs that come into a digital team nowadays that don't have some e-commerce or e-payment element to them. In most cases, online payments are made by credit and debit cards using traditional online payment gateways such as Sagepay, Worldpay and Paypal, but there is another way...

Whether you want to make a secure one-off payment, recurring subscription payments of the same amount or regular changeable payments, you can take advantage of paperless Direct Debit. This is an online version of the traditional paper-based mandate that 67% of the public already uses to pay their bills.

What are the benefits of paperless Direct Debit?

There are a number of benefits to collecting payments using paperless Direct Debit over credit/debit card payments. Here are just a few of them:

Customer Trust

Every year, more than £1 billion is processed by Direct Debit. This alone shows that there is a lot of trust in the Direct Debit scheme. Promoted by all banks and most bill issuers, it is likely that your customers already know and understand the guarantee and also know that they can stop the payment at any time by contacting their bank or using online banking, eradicating the need to battle with their credit card company to get a chargeback. If a customer knows they have control over their payments to you, they are more likely to trust you.

Payment information does not change

While credit and debit card numbers can change every time a new one is issued, your customer's bank account details rarely change, and even if they do then any Direct Debit agreements usually transfer with the account. This means that once set up, you can continue to take regular payments out for the life of your relationship with that customer instead of asking them to re-enter their card numbers every time it expires.

Cost savings

Depending on the method you use to take the payment, the Direct Debit transaction fee can range between 0% and 1%. If you compare this with a typical 2.5% transaction fee for payment gateways, the savings can soon add up.

How can you collect payments?

On your website, it’s a case of showing a simple online payment form requesting the name, address and bank account details from your customer. However, there are a few things you have to have in place before you can collect payments this way:

Firstly, you will need a Direct Debit agreement with your bank. If you already take traditional Direct Debit payments then you will already have this and if not, then it's simple to set up.

Secondly, you will need to get paperless approval from your bank. Before granting this, they will want to see a walkthrough of your data collection screens and understand how you are validating your data to ensure that your customer is who they say they are. The bank will tell you what they require and depending on the value of the transaction and the risk, this could range from simple checks on the bank account and sort code numbers to using a third party identity verification service.

Lastly, you have to send your customer a letter with the Direct Debit details and enclose the Direct Debit guarantee, usually around 3 days after the user applies online and certainly no less than 10 days before taking the payment.

Once all this is set up, and your customer gives you their payment details, you can start taking payments straight away. Money is transferred directly between the customer's bank account and yours on a three-day cycle.

Is there an easier way?

Yes, there's an even easier way! There are a few providers in the UK who can take the Direct Debit transaction for you. These work in similar ways to how online credit/debit card payment gateways work and are integrated into your website in a similar way. In most cases, you don't even need an agreement with your bank to use them. They do incur transaction costs but these are typically around 1% of the transaction, so are still very cost-effective. Of course, Headland can also help with setting up and integrating these services into your existing or new website.

I really could do with your help! If you find this article interesting, could you please do me a favour by either sharing it on your site or on social media. I would love to hear yours and other peoples' thoughts on this subject. And if this or any other content on the site has helped you and you would like to show your appreciation, then you can always buy me a coffee ☕️ It would make the time I put into this more than worthwhile! Thank you 😃