Did you know that a whopping 50 million direct debit transactions are processed every month in Australia? Direct debit is a type of pre-authorised payment in which a company or business collects payments at regular intervals directly through a person’s bank account. This mode of payment isn’t new; it’s been around since the 1960s (1964, to be exact). So, if you’re still not sure what direct debit payments are exactly, read on to find out.
How Direct Debit Works
When you set up a direct debit, a customer who wants to pay you for a service or product is able to pay you on a regular basis. A set amount is deducted from your customer at certain time periods (for example, every month ).
What Is Direct Debit Used for?
Subscriptions or Memberships – It’s a safe and easy way to pay for products and services like magazine subscriptions or gym memberships.
Regular Bills – Via direct debit, bills can be paid on time each month without any hassle.
Direct Debit for Single Payments
Direct debit can also be used for one-off payments. However, the processing time with direct debit is not as fast as a credit card and thus will take slightly longer to complete.
Benefits of Direct Debit
Here are the benefits of enabling direct debit payments in your company or business:
Saves Your Precious Time – Say goodbye to chasing after your clients and customers for payment or sending invoices. Why do that when the direct debit is there as a better option?
Keep Your Customers – Direct debit increases customer retention by providing them with a simple, effective and automated way to make their payments.
Allows You to Have More Control – Direct debit lets you control the regular payments your customers make. You can set the exact frequency and amounts.
Save Money – When compared to recurring card payments, direct debit offers a cheaper way to collect payments.
Avoid Errors – Since payments using this method are made directly through the bank instead of a card, it ensures a very high success rate. In case a collection does fail, you’ll be notified by the bank as to why it happened.
How to Set Up Direct Debit for Your Customers
There are a large variety of options available for you to choose from for enabling direct debit payments. Make sure you do your research to find the right one. Some, like Ezypay, are even free to get started with. Remember, the right service will make processing payments a breeze to handle and manage.
Also, make sure the service you choose is PCI DSS (Payment Card Industry Data Security Standard) accredited and compliant with the relevant Australian and local country’s banking rules and regulations.
In the future, apart from recurring bill payments and regular debt payments, other applications of direct debit payments may include :
- Memberships and associations fees collection.
- Nonprofits accepting gifts.
- Small businesses offering instalment plans.
- Tenants paying rent to landlords.
As you’ve discovered, there are a host of benefits and reasons why you should use a direct debit system for your business. It can save time, increase customer retention, allows you to have more control, save money and avoid errors.