Helping customers make payments easily should be a top priority for any business.
Direct Debit and continuous card payments can both make regular and recurring transactions super simple, but both have their pros and cons.
Both can be used for payments that vary in value and regularity. However fees, admin and transaction times, can be very different.
How do you decide which is the best method for both you and your customers?
Direct Debit is a simple way of paying bills for a customer, and ensures reliability of payment for organisations. Once payments are authorised, they can automatically be made directly from a customer’s bank account without the need to use a credit or debit card.
As well as reducing admin, Direct Debit is low cost and available to anyone with a UK bank account, including business accounts. Once a Direct Debit is set up, it tends to have a longer retention rate as payments won’t be interrupted when payment cards expire, change or are cancelled.
Direct Debit reduces the chance of late or failed payments and avoids the higher transaction costs associated with card payments.
However, Direct Debit is not suitable for transactions needing instant payments, although they can be used for one-off purchases.
Initial payments take time to set up through a ‘mandate’ where your customer authorises payments to be taken when they are due, and funds take a minimum of three days to clear.
Your customers may welcome the high levels of protection offered by Direct Debit too. The Direct Debit Guarantee includes assurances that they will get their money back if there is an error made in the payment, and that they can cancel payments at any time.
Continuous card payments
Customer authorisation for you to take payments from their credit or debit card on an ongoing basis, is often referred to as continuous card payment, or Continuous Payment Authority (CPA).
Like Direct Debit, this can be used for flexible recurring payments, and offers a low chance of late payments. But because credit and debit card details change far more frequently than bank accounts used for Direct Debit, this can lead to failed payments and extra admin for everyone.
Plus the costs are considerably higher with CPA – a set charge per transaction or a percentage fee, and often a monthly account fee on top.
CPA does offer one advantage though. If you require instant payments, for example because you are offering next day delivery, CPA would be a better option in that particular circumstance.
Lastly, although it’s possible for customers to cancel and claim refunds for incorrect payments paid through CPA, customers may not have such a high level of trust in the process. CPA payments tend not to be listed as such, and consumer rights are often not made as clear as they could be, for example through the Direct Debit Guarantee.
London & Zurich provide both Direct Debit and Card Payment services to tailor most businesses no matter what size they are. To find out more information contact our team today on 0121 234 7999.