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Payments

Direct debit (ACH, SEPA, BACS)

Pulling funds directly from a bank account under a mandate. Cheaper and more durable than cards, but slower and reversible for longer.

Direct debit collects from a bank account under a mandate the customer signs once. ACH in the US, SEPA Direct Debit in the euro area, BACS in the UK.

For recurring billing it has two large advantages: cost, typically a flat fee rather than a percentage, and durability, because bank accounts do not expire the way cards do, which removes a large share of involuntary churn.

The costs are speed and reversibility. Settlement takes days, failures surface late, and dispute windows are long: a SEPA Core direct debit can be reversed for eight weeks with no reason given. It suits larger, contracted invoices more than small consumer subscriptions.

Related terms

  • Payment gateway and processor The gateway routes a transaction; the processor moves the money. Many products do both, which is why the terms blur.
  • Settlement and payout Funds moving from the card networks to your bank account, usually in batches and net of fees.
  • Involuntary churn Customers lost because a payment failed rather than because they chose to leave. Usually the cheapest churn to recover.