Unlike card transactions, Direct Debit is not an instant payment method. Payments take at least 3 working days to clear, and in most cases advance notice must be given to the payer before the payment process can be initiated.
This guide details the timings for Direct Debit, and how you can optimise them.
Except for the cases below, you must notify your customer before submitting a payment to be collected by Direct Debit. By default, the amount of advance notice required is 10 working days, although this can be reduced through agreements with your customer and with your bank.
Notable exceptions to this rule are:
Explicitly authorised payments, where a customer authorises a specific payment to be taken immediately. This authorisation can only apply to a single payment at a time.
Fixed payment schedules, where a customer has already been notified of the date and amount of each payment (for example, they were informed that £10 would be collected from them on the 1st of every month).
See our guide to taking payments for more details.
Timings after payment submission
Once submitted to the banks, Direct Debit payments are processed using the Bacs three day cycle. Because of the specifics of how Direct Debit works they can only be considered successful if no failure report is received several days later.
Full details of the optimised collection time is provided below, but in summary:
If a Direct Debit mandate is already in place, payment is collected 2 working days after submission, can be considered 99% confirmed 3 working days after submission, and 100% confirmed after 4 working days.
If a Direct Debit mandate needs to be created, payment is collected 4 working days after submission, can be considered 99% confirmed 5 working days after submission, and 100% confirmed after 6 working days.
The key to understanding both payment timings is the Bacs three day cycle.
The Bacs three day cycle
All Direct Debit processes operate using the Bacs three day cycle. Designed in the 1970s, the cycle specifies the timescales on which banks must respond to input from each other.
Working day 0 (submission): A message (e.g., a payment request) is submitted to Bacs between 7:00am and 10:30pm. Bacs then distribute this request to the relevant parties overnight.
Working day 1 (processing): Having received the message at 6:00am, the relevant parties prepare to respond. For example, your customer's bank would prepare to debit their account.
Working day 2 (action): All parties take the action required. For example, your customer's bank would debit their account, whilst your bank would simultaneously credit yours.
The Bacs three day cycle is used for collecting payment by Direct Debit, setting up new Direct Debit Instructions, and for notifying the merchant of any payment failures. Chaining several three day cycles together gives the optimal timeline for collecting a payment by Direct Debit.
Collecting payment against an existing mandate
A single Bacs processing cycle is used to collect a payment against an existing Direct Debit Instruction. Collection therefore takes two working days:
However, it is important to understand what happens when a payment fails. Because of the way Direct Debit works, even payments which have failed will be credited to your account on day 2. If your customer's bank thinks the payment should not have happened (if the customer's account was overdrawn, for example) they will notify your bank to get the payment reversed. Failure notifications are sent via an additional Bacs three day cycle, and generally the customer's bank will submit this notification on working day 2 (the day the payment was due):
However, in around 1% of cases the notification is only submitted the following day. In this case it is received by the merchant's bank 4 workings days after payment submission:
If a failure notification is received, the payment will be automatically reversed. As a result, a payment cannot be considered complete until there is no receipt of failure notification on day 4.
Collecting payment when no mandate exists
If you don't already have a mandate with your customer, one needs to be set up before payment can be collected. This adds an additional Bacs processing cycle. Taking into account the 1% of cases where failure notifications are submitted a day late, collection through confirmation takes six working days:
As indicated above, payment requests can be submitted as soon as a mandate has been approved, on day 2. Submitting a payment request before this (for example on working day 0), is explicitly disallowed by the scheme.
Non-working days and optimising timings
Bacs provide a list of working days for the Direct Debit system in their annual Bacs processing calendar. Submissions to the banks cannot be made on non-working days, and the banks themselves will not process any Bacs messages on non-working days.
While the banks may not work on non-working days, it is possible to receive messages they previously sent you. For example, payment failure reports distributed overnight on a Friday are available to download on a Saturday morning.
Payment timings with GoCardless
GoCardless process all Direct Debit payments according to the fully optimised timetable above. This means that payments will reach your account after 5 working days, or 6 days if no mandate exists.
To find out more about collecting Direct Debits with GoCardless visit GoCardless.com.