The explosion of direct debit usage: How it became such a popular service for businesses

For many businesses already using direct debit for cash flow management, the advantages of the service are there to be seen. The release of the 2014 analysis into direct debit usage by the Australian Payments Clearing Association (APCA) may be preaching to the converted, but for businesses looking into the potential of managing cash flow with direct debit, the facts might be encouraging.

APCA’s analysis shows that direct debit payments have increased during 2014 by around 200,000 individual items a day. So far this year, direct debit volume has been clocked at 2.6 million units per day – quite a jump on 2013’s 2.4 million units. What’s more is that the number has grown year on year for the past two decades.

In 1994 (in what some may call simpler technological times) direct debit usage totalled 300,000 units a day. Since then, the figure has doubled every 4-6 years to reach the impressive pinnacle at which it stands today.

It’s the type of sustained growth that many industries and services dream of, and the kind that can only happen for services that have something worthwhile to offer. So what are the attributes that have caused direct debit usage to grow almost ninefold in recent times, making it responsible for the flow of billions of dollars every day?

Security

As the technology news media reports on cyber scams and digital security breaches practically every day, it is no wonder that people are cautious about how they spend and send their money.

According to security experts Symantec, online security breaches grew by 62 per cent last year, with information on 552 million identities exposed in the process. Combined with high-profile breaches to the likes of AT&T, Facebook, and YouTube, public confidence in digital services has been dented somewhat.

Meanwhile, the Payment Card Industry Security Standards Council (PCI SSC) have provided encouraging frameworks to maintain the strongest card data security processes. The council award services with a data security standard (DSS) – Level 1 being the highest grade – to show consumers which organisations are doing the most to protect their information.

Using a service that is fully PCI DSS Level 1 compliant has reassured hundreds of thousands of individuals that their direct debit payments and personal details will remain safe and secure.

Convenience

Once upon a time, tying a piece of string around one’s finger was an effective way to aid memory. In the current day, people can find there aren’t enough fingers and toes available to keep track of everyday reminders. With barrages of information, people must rely on digital reminders, alarm prompts or calendar alerts set to their devices to remind them of important tasks.

The digital realm has simplified and improved the way we conduct everyday processes dramatically. Customers can be encouraged to set up a regular payment and avoid the need to remember to do it themselves. For businesses, providing their customers with direct debit payment automates a process that would otherwise be a constant chore, while improving business cash flow and profitability at the same time.

Additionally, a paperless direct debit solution eliminates the need for hard copy payment reminders or invoices, decluttering the business and making the most of modern technology.

Regularity

The APCA report also details how much money is being spent per month via direct debit payments. This makes for interesting reading as the figure seems to have dropped over the past two years – from a record high of $476.1 million per month in 2012, to $442.3 million in 2013, and an average $438.9 million per month so far this year.

This increased number could be the result of a wider adoption by small and medium sized enterprises (SMEs).

Direct debit services provide a business with reliable cash flow and recurring revenue. After all, no one enjoys not knowing where next month’s income will come from, and having an exact figure is both a benefit to business planning and a safeguard against unwelcome market fluctuations.