Direct Debit & Recurring Card
A debit transfer or "pull" payment is a transaction initiated by the receiver of funds, where the bank receives a payment request by the payee, and then sends the funds per request.
USE CASES
Utility bills
Mortgages
Check conversion
Debit = pull funds out of bank account, subscription bill pay
What is Direct Debit?
Direct Debit is a payment method where a customer authorizes a company to collect varying amounts directly from their bank account at agreed intervals. It's widely used for regular bills, subscriptions, and instalment payments.
In the United States, direct debit usually means an Automated Clearing House (ACH) transfer from a bank account to a biller, initiated by the biller.
The problem of direct debit fraud is extensive according to research by Liverpool Victoria Insurance[21] which reveals that over 97,000 Britons have fallen victim to criminals setting up fraudulent direct debits from their accounts. An average of £540 goes missing before the customer notices. Direct debit payment fraud in 2010 accounted for around 10.6% of all identity fraud cases. The extent of direct debit scamming is set to grow to 41,000 cases a year by 2013, equating to a 57% rise.
Settlement Proposed to Resolve Widespread Consumer Billing Issues by PPL Electric Utilities
What are recurring card payments?
Recurring card payments involve a customer permitting a merchant to charge their credit or debit card automatically at set intervals. This method is common for subscription services, memberships, and ongoing payments.
Authorization
Requires signed mandate
Needs card details and agreement
Transaction fees
Lower
Higher, especially for card-not-present transactions
Customer protection
Direct Debit Guarantee
Card network security measures
Success rate
Higher (95%+)
Lower (failure rates can exceed 20%)
Payment source
Bank account
Credit or debit card
Processing time
3-5 working days
Immediate to next-day
Flexibility
Fixed dates, variable amounts
Flexible dates and amounts
Pros and cons
Direct Debit
Pros:
Higher success rates
Lower transaction fees
Strong customer protection (Direct Debit Guarantee)
Ideal for variable payment amounts
Cons:
Longer processing time
Requires bank account details
Less flexibility in payment dates
Recurring Card Payments
Recurring Card Payments
Pros:
Fast processing
Convenient for customers
Flexible payment dates
Suitable for international transactions
Cons:
Higher failure rates due to card expiration/cancellation
Higher transaction fees
Less protection compared to Direct Debit Guarantee
When to use each payment method
Direct Debit is best for:
Utility bills and regular services
Membership fees
B2B transactions
Businesses prioritizing payment reliability
Recurring card payments are ideal for:
Subscription-based services
E-commerce businesses
International transactions
Businesses needing immediate payment processing
Costs and fees
Direct Debit typically involves:
Setup fees: £100-£500
Transaction fees: 10p-50p per transaction
Monthly fees: £10-£50
Recurring card payments usually incur:
Transaction fees: 1.5%-3.5% + 20p-30p per transaction
Monthly gateway fees: £20-£50
PCI compliance costs
RESOURCES
https://docs.xft.finance/learn/flows/payments/debit-transfer
https://stripe.com/resources/more/ach-debit-an-in-depth-guide
https://www.fidelity.com/learning-center/smart-money/cant-pay-utility-bills
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