Direct Debit – 60 years young and still leading the way

Direct Debit. The way millions of us pay our regular bills and have done for as long as most of us can remember. According to Pay.UK, the organisation that runs the UK’s retail payments operations,
4.8 billion payments were made by Direct Debit in 2023 – that’s over 9,000 every minute of every day or 69 payments for every man, woman and child in the UK. Here at SmarterPay, market leaders in Direct Debit solutions, we process over £28 billion worth of Direct Debits for businesses and charities large and small, all seeking to collect an agreed amount of money from customers on an agreed date and an agreed frequency.

Conceived originally in 1964 by Alastair Hanton, a Unilever executive at the time who was looking for a way to collect money from ice cream vendors, it’s tempting to say Direct Debit is 60 years old this year. However, as Mr Hanton said when interviewed by his son on the subject, getting it adopted by the banking industry was ‘a battle’.

Originally named Automatic Debit Transfer (ADT), after ‘many meetings with stuffy bankers’ Mr Hanton succeeded and the Inter Bank Computer Bureau (latterly Bankers’ Automated Clearing Services, Bacs and now Pay.UK) was conceived in 1968 by the banking industry. Initially for the processing of Direct Credit payments and from 1970, for what was now called Direct Debits, 30 million Direct Debits were processed in that first year. Not satisfied with changing the way the population paid for regular bills, Mr Hanton went on to run National Girobank and introduce free bank accounts, deliberately locating it in Merseyside to bring jobs to an impoverished part of de-industrialised Britain.

1970 was the year the first jumbo jet landed in Britain, Chrysler launched the Hillman Avenger to compete with the Ford Escort and Vauxhall Viva, Martin Peters became the nation’s first £200,000 footballer moving from West Ham to Spurs, Paul McCartney left The Beatles and Edward Heath became Prime Minister. All the more remarkable then that 54 years on, as a nation we are still paying our household bills by Direct Debit.

Yes, Direct Debit has evolved, but the fundamental product remains the same as it was when launched simply because it works so well for both billers and customers alike. Billers like that they receive cleared funds into their account on a known date with significantly reduced administration and bill paying consumers like the convenience, reliability and money back guarantee. However, whilst bill payers still see the same logo, the same benefits and have the same guarantee as they did back in the day, the way Direct Debits (and Bacs Direct Credits) are collected and processed has most definitely moved with the times.

It started with the payment information being sent to Bacs on physical magnetic tapes (think Benny Hill in the Italian Job) or floppy discs of various sizes delivered by couriers to ‘tape receptions’ in Edgware or the City of London (sometimes folded in half by blissfully ignorant couriers, occasionally lost in transit). A telecoms transmission option was added from 1983, electronic mandate lodgement (AUDDIS) in 1996 and then a move to Internet protocol (Bacstel-IP) from 2006. With each development, the security associated with the payment details being communicated improved immeasurably.
From 1998, consumers have been able to sign up to Direct Debit over the phone and on the internet and whilst paper instructions are still a thing, they are now relatively few and far between.

Fast forward to 2024, and new research from The Regular Payments Marketing Company shows that 82% of UK consumers prefer to pay their regular bills by Direct Debit – a significant increase on the 68% figure last published by Bacs.

In summary therefore, Direct Debit is as relevant today as it was when Alastair Hanton conceived in 60 years ago as a way of collecting regular payments for ice cream sales. SmarterPay is very proud of our part in the story of Direct Debit and we are constantly looking for ways to enhance the experience for our customers.

If you are looking to collect payments by Direct Debit and would like further information please contact sales@smarterpay.com or call the team on 01482 240886.

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