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How Direct Debit Could Improve Your Business Payment

How Direct Debit Could Improve Your Business Payment

February 18, 2022

Small and medium-sized enterprises (SMEs) depend on their cash flow to both thrive and survive. Late collect payments or unpaid invoices make business become unsteady. The main reason why late payments and outstanding invoices happen is the inconvenient payment method that customers have to face. Many of them still have to go to an ATM or supermarket to make payments, which is very time-consuming.

The best solution to handle them is direct debit payment system, a new method that effectively increases the rate of successful payments. What is direct debit? Does it pay a good value to your business cash flow?

What is Direct Debit payment?

A direct debit payment system is a pre-authorized payment set to a fixed or varying amount, paid to a business by a customer for an agreed amount, frequency, and an agreed period. In other words, the customer gives consent to draw their money from a debit/credit card or a bank account under a direct debit agreement.

Direct debit is often used for almost everything, mostly on regular or recurring payments. The quick example of direct debit products for end customers is the convenience of never having to worry about missing a due date on rent fees. No more late payments so it can give them a peace of mind.

Advantages and benefits of Direct Debit for businesses

You might think that direct debit benefits only makes the payment simpler for the customer. However, the direct debit system is quite beneficial for both the customers and the businesses.

No more delayed payments with direct debit payments

Direct debit is a method that allows customers to authorize a third party to receive money from their bank account. The debit transaction is often scheduled and always in the same amount as planned. By assigning it for a subscription, delayed payment rarely happens. Since it is verified automatically from customers’ that have given their consent to the bank and to the subscribed business, the payment security is guaranteed so the business may gain their customers' trust.

Direct debit system is the simplest and most convenient way for you to pay regular bills monthly, typically used for credit card bills, utility bills, recurring retainers, loan payment, installment payments, and other recurring payments. The payment method practically helps the customers pay each of them all at once, so they don't need to perform transactions one by one.

From better cash flow to forecasting, direct debit has proven to be convenient and cost effective

While direct debit benefits helps to avoid late payment fees, the business gains a better cash flow with the punctual payment. A small and medium company with many delayed payments often faces a complicated problem with its cash flow. A serious debt or, for the worst, bankruptcy is always the biggest fear which appears at the end.

When the customers’ payments appear on time and in the exact amount every month, there will be no problem with the cash flow. Your business can also forecast your cash flow for the next several months, making it easier for you to create a plan for expansion.

No more awkward money chat

Sometimes a business has to chat with their customers about the late payment or unpaid invoices. Instead of reminding the customers to pay their monthly invoices, the business can receive funds on a set schedule that helps both of them.

Engage retention

As a simple payment method that can be renewed and maintained over a long period, the customer does not have to set up payments to the business continuously. An automated direct debit system will encourage customer retention and improve recurring revenue.


You can tailor the direct debit system according to what your business needs. It will create a more affordable system that is easy to integrate. The system is also cloud-based, so there’s no additional hardware necessary.

Secure payment method

Both the customers and the business get a guaranteed payment method. The customer is not necessarily put a PIN on it, so there is no chance of data leaks during the payment. Also, the direct debit system will always take payment according to the agreed amount, so there is no chance of incorrect payment.

Understanding how direct debit works for businesses

In basic, how direct debit works is not that complicated. First, the business will ask the customers to authorize access to the customer’s bank account, along with the date and the amount of the related payment. With the authorization, the bank will give access to the business to receive the payment directly from the customer’s account.

In Indonesia, Bank Indonesia (BI) as the central bank has regulated consumer consent as one of the main aspects in open APIs. BI requires all financial institutions to have consumer consent written through an electronic or non-electronic media and/or recorded verbally before processing their data.

How to get set up for direct debit payment method?

To set up a direct debit, you must prepare a mandate for your customer to sign. It should contain information about the account holder’s name, payment date, and account. The mandate can be a hard copy or an online form for the customer to complete and return to you. Later, you can send the mandate to the bank to activate the mandate.

You can also integrate your business into the bank system with direct debit API services from Ayoconnect. The direct debit from Ayoconnect will help your business connect directly to more than 6 banks in 1 integration process. The integration will simplify every payment transaction process, helping you provide a hassle-free payment method for your customers. Such convenience will make customers gain more trust in your business.

Direct debit allows your business to get authorized access to the customers’ bank accounts. However, It is not only about payment punctuality but also the easy setup and security. As the most prominent financial API platform in South East Asia, Ayoconnect proudly presents the direct debit APIs to convey your great ideas for growing your business.