Direct debit is a simple and convenient way for consumers to make regular payments straight out of their financial institution account. It is most often used for regular transactions like mortgage repayments, insurance premiums and utility bills.
To pay by direct debit, consumers need to complete a Direct Debit Request (DDR) authority with the business or company (the biller) that they wish to pay. The DDR gives the biller permission to collect payments from the consumer’s account on a regular agreed due date without the consumer having to manually arrange a payment. Once the biller has initiated the collection process payment is made through the financial institution where the consumer’s account is held.
Billers that accept DDRs from consumers are known as Debit Users. There are some 18,000 Debit Users in Australia.
Direct credit is widely used by businesses to make regular, low value payments into transaction accounts. Common examples are salary payments, (see diagram) payments by government departments such as Centrelink allowances, and dividends and interest payments. In recent years, direct credit is also being used to provide widespread access to internet-based (sometimes called “Pay Anyone”) and phone-based banking services.
Businesses initiating direct credits (either for themselves or on behalf of customers) are known as Credit Users. There are about 240,000 Credit Users in Australia. To receive direct credit payments, account holders simply need to give their account details to the Credit User.
BPAY is Australia’s bill payment service. Financial institutions provide convenient phone and internet access for customers to pay bills electronically out of their accounts, enabling a more efficient collection service for billers.
APCA’s Bulk Electronic Clearing System (BECS) provides rules for the exchange and settlement of direct debit and direct credit payments. BPAY is operated by the Cardlink Group under its own set of rules, and is owned by five Australian banks.