Direct debit payments

Direct debit is an automatic payment that happens periodically after a customer requests it. It automatically transfers money from your customer’s bank account to your bank account.

Becoming a direct debit user requires already having an established business. Direct payments are fast. As long as you file requests within the cut-off time, funds are within your account by 9.00am the next business day. The Australian Payments Clearing Association (APCA) coordinates direct debit payments in Australia.

Read the Reserve Bank of Australia’s About the payments system page to learn more about the APCA’s role in Australia’s payments system.

Benefits of direct debit transfer

Direct debit payments can have advantages over other forms of payments. Check out these examples:
  • Convenient for recurrent payments

    Direct debit payments are convenient for recurrent payments.
  • Low labour costs for recurrent payments

    Direct debit payments have low labour costs for recurrent payments.
  • Lower risk of theft than cash

    Since payments go directly into your account, direct debit has less risk of theft than cash.
  • Automatic

    Direct debit payments are automatic, so they can be more convenient and less risky than manual forms of payment, such as EFTPOS and cash.
  • Fast transaction speed

    After you set them up, direct debit payments are fast.
  • Proof of payment

    Direct debit payments provide proof of payment to you and your customers, which can help avoid disputes.

Disadvantages of direct debit transfer

Direct debit payments have some disadvantages over other payment methods. Check out these examples:
  • Inconvenient for one-off payments compared to EFTPOS and cash

    Direct debit requires gaining authorisation from your customer and waiting for your bank to organise payment from your customer’s bank. Most of the benefits of direct debit also don’t apply for one-off payments. Direct debit is most suitable for recurrent payments.
  • Service fees

    Your or your customer’s financial institution may charge fees to process direct debit payments.
  • May be unavailable for new businesses

    Becoming a direct debit user requires your business to have adequate financial strength, integrity and fraud controls.

Processing direct debit payments

If you want to set up direct debit payments, try these steps:
  1. Make sure your business is financially stable and has good fraud controls to protect your customers.
  2. Apply to become a direct debit user through your financial institution. Your financial institution is your bank, building society or credit union. Your financial institution will check your business’ financial strength, integrity and reliability.
  3. If your financial institution approves your request, your business will get a unique user identification number that will let you set up direct debit payments.
  4. Let your customers know you offer direct debit. If they want to use it, your customers might request to pay by direct debit.
  5. Put your customer’s request in an electronic file.
  6. Send the electronic file to your financial institution. Your financial institution will process your customer’s request and send a copy of the request to your customer’s financial institution.
  7. If your customer’s request is successful, your customer’s financial institution will begin automatically paying money into your account.
  8. Provide your customers with a receipt and/or a GST tax invoice if they request one. If GST applies, you must provide a GST tax invoice within 28 days if your customer requests one.
If your customers pay by direct debit, you must fulfil certain obligations. Check out these examples:
  • You must make a record of each time a customer makes a direct debit request and you must keep the record for seven years.
  • If you want to change direct debit arrangements, you must give your customers at least 14 days’ notice.
  • You must act promptly if a customer asks you change or cancel a direct debit payment.
Read the APCA’s Direct entry page for more information about processing direct debit transfers.

Tips when using direct debit payments

If you’re considering offering direct debit payments, check out these tips:
  • Offer direct debit if your customers want it

    Some customers prefer to buy from businesses that offer direct debit.
  • Use direct debit payments for recurrent payments

    Direct debit is convenient and lowers labour costs for recurrent payments.
  • Shop around

    Look for the best direct payment provider for your business.

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