Implementing a Unified Strategy for Direct Debits and Recurring Card Payments. Guest blog 

If your business receives regular payments from your customers, it’s crucial that you choose a convenient and secure processing method. Weigh up the differences between Direct Debit and recurring card payments – both of these methods offer regular payment plans, but with distinct advantages that suit different business needs. 

Direct Debit is undoubtedly sought after for the lesser charges and failure rates. Ideal for a smooth, predictable cash inflow, the method can be used widely for periodic payments like utility bills, council taxes, subscription services like gym memberships or streaming content, and other periodic payments to spread the cost over time. One prime advantage of Direct Debit is the security provided by the Direct Debit Guarantee, which states if there is an error a customer must be refunded in full by their bank. 

Recurring card payments, or what is commonly referred to as Continuous Payment Authority (CPA), occur through accepting money from a customer’s debit or credit card. Quick clearance of funds is an advantage with this route: with next-day settlement offered by most mainstream acquiring banks and, therefore, may be more appropriate where the business needs quick payment processing. Recurring card payments are typical of services requiring quick clearance, higher-value goods, or foreign currency transactions. These payment methods incur higher charges compared to Direct Debit and has a greater risk of failure from cards expiring or being cancelled. 

Key differences to consider: 

• Source of funds: Direct Debit credits from a bank account, whereas recurring card payments charge a credit or debit card account.
• Timing of payment: Recurring card payments clear faster, often the next day with some acquirers; on the other hand, Direct Debit might take several business days.
• Cancellation: Customers can cancel a Direct Debit through their bank, while recurring card payments need to be cancelled through the business.
• Security: The Direct Debit Guarantee supports and protects the customer in the event of any error. In contrast, card payment disputes can be challenging to resolve and may be financially costly to the business.
• Costs: Direct Debit transactions usually involve lower charges per transaction compared to monthly rates and charges for recurring card payments.
• Failure rates: Direct Debit carries a lower rate of failure because it directly deducts the money from the bank account, which has less chance of expiry compared to credit cards.  

It can be verified with data from the Bank of England that Direct Debit continues to develop, reflecting reliability and efficiency. It is an alluring choice of payment method for a business seeking security and cost-effectiveness. 

However, to fulfil the needs and demands of all customers, it is worth offering both Direct Debit and recurring card payments. This dual approach is quite flexible and will afford the customers freedom in choosing what they are most comfortable using, thereby enhancing satisfaction and loyalty toward the brand. Multiple payment options help businesses acquire a broader customer base, optimise cash flow management, and minimise payment churn. 

Direct Debit may be cheaper and more secure, but recurring card payments are quick and flexible. Understanding their separate core strengths will allow a business to choose the one that best serves its operational needs and customer service. Offering both Direct Debit and recurring card payment facilities will keep your business aligned with current payment preferences and ensure increased customer satisfaction and business growth.