What is the difference between a standing order and direct debit

Have you ever been paid late? Do you ever have to chase up payments? If the answer is 'yes', then you know what a hassle it is. Standing orders and direct debit change all that – both payment methods ensure your bills are paid automatically. But what is the difference between a standing order vs direct debit? Let’s dive in and find out.

What is direct debit vs a standing order?

Although standing orders and direct debits are automated payment methods, they are not the same thing.

With standing orders, your customers control the process. They instruct their bank to pay your business a fixed sum of money regularly. Your customers can cancel standing orders whenever they want.

With direct debit, your business is in the driver’s seat. The customer gives you permission to withdraw an agreed amount of money from their bank account on an agreed date. You can change the amount or date, but you must notify the customer.


Read more: How does Direct Debit work?


Comparison of standing order vs direct debit

Let’s compare the two payment methods head to head.

Set-up

Direct debit: Set-up for your customers is streamlined, automated and easy, thanks to paperless direct debit solutions. You can offer customers a choice of set-up options – email payment request, online form, paper form or face to face.

Standing order: Your customers do all the legwork. You inform them of the payment amount and date and then they contact their bank. Depending on the bank, your customers may be able to set up online or by phone. They’ll need to fill in a standing order form and ensure the bank gets it.

Cost per payment

Direct debit: Ezidebit's direct debit payment solution has a simple pricing structure. For clients who solely use Ezidebit’s EziOnline payment portal without any integrations with other business management software, the transaction fees are as follows:

  • $0.99 per transaction – Bank account

  • 1.99% per transaction – Visa and Mastercard

  • 2.70% per transaction – AMEX

Businesses can choose to pay the transaction fees or pass them on to the customer. For clients who use alternative integrated software solutions, cost per payment depends on the software. Find out more about Ezidebit's pricing.

Standing order: Banks don’t normally charge the customers or the recipient of the standing order.

Flexibility

Direct debit: Very flexible – customers can amend, pause or cancel payment schedules by contacting you. You can make updates directly through your payment provider’s portal, such as EziOnline, or using integrated business software.

Standing order: Not very flexible – if customers need to change the date or amount, they have to cancel the existing standing order and create a new one.

Risk of late payments

Direct debit: Low risk of late payments, thanks to automatic payments and payment notifications that remind customers when a payment is due.

Standing order: Higher risk of late payments because there is no payment notification. It may take weeks before you realise a payment has failed – the customer may have cancelled it or there may be insufficient funds in the customer’s bank account. Plus, customers are often slow to set up or amend standing orders.

Administration required

Direct debit: Beyond submitting a direct debit request form and setting up payment, there’s no admin involved. No more reconciling payments manually or performing other invoice-related admin.

Standing order: In contrast, standing orders require much more time investment into your business administration. You’ll need to check your bank account regularly to verify if payments have gone in and manually update your accounts.

Fraud & security protection

Direct debit: Since there are no PINs, card numbers, passwords or other sensitive data, customers enjoy high levels of protection. If your payment solution is Level 1 fully compliant with the Payment Card Industry Data Security Standard (PCI-DSS), customer protection is even higher.

Standing order: Customer protection is lower. If customers don’t use the correct details when setting up, they will have difficulty getting back payments that go missing. Further, if customers cancel a standing order before the agreed period, they may incur penalties or fees and their credit rating could be affected. That said, customers have some consumer protection in cases of fraud.

Set up direct debit with Ezidebit

With Ezidebit, your business can quickly and easily set up direct debit payments. Download Your Quick Guide to Direct Debit now to get all the information you need to feel confident about making a decision for your business, or contact us to find out more.