One step towards expansion of your business is to provide you customers with more and easier ways to make payment for the goods or services you provide. When we talk about regular online payments, there are several ways in which your customers can make regular payments on your website. Let’s talk about Direct Debit and Credit Card payments (recurring card payment or continuous payment authority) and their differences since they are two of the most used methods for taking regular payments.
These two methods of payment do really look alike, but there are differences that could make a strong impact on your business, so let’s get to know them first.
Direct debit is a method where your customer gives instruction to their bank, giving express permission for you to take different amounts from her/his account, as long as advance notice been given. It is basically an authorization from your customer that allows you to take payments directly from their bank account whenever their payment is due. Frequency and amount of these payments can vary. Direct debit is generally related with regular and recurring payments, but can also be used for one-off payments.
Recurring card payment is a method which operates in a similar way, your customer gives authorisation that allows you the permission to take regular payments from the customer, but from her/his debit or credit card, not her/his bank account as in direct debit. Some of your customers may not want to set up a direct debit, so this allows you to take payments that vary in frequency and amount and it will remain in place until your customer cancels this.
Both can be used for paying regular bills, subscriptions, different memberships, insurance policies, accounts, etc.
What differs these two methods is that direct debits means that you are taking payment from your customer’s bank account, whereas recurring card payment means you are taking payment from their credit or debit card. Recurring card payments are based on one specific card number, and that number can be changed further on, but direct debits are based on a bank account number, which is unlikely to change. When using recurring card payments your customers must give you their 16 digit card number, which is then linked to your bank account by the card networks and acquiring banks. When using direct debit, payments are taken directly from your customer’s bank account and customers sign up for that with their bank account number and sort code.