1. What is Direct Debit in the UK?


1.1. Overview


Direct Debit is a popular and secure payment method in the UK that allows businesses and organisations to collect funds directly from a customer's bank account with their authorisation. It is commonly used for recurring payments such as utility bills, subscriptions, memberships, and instalments.


Direct Debit was introduced in the UK in 1968 by the UK banks as a more efficient and reliable alternative to standing orders and cheque payments. It was developed by BACS (Bankers' Automated Clearing Services), a central payments network. 


Since its inception, Direct Debit has become the preferred method for automated recurring payments, with billions of transactions processed annually, from all industries.



Direct Debit v. Direct Credit

A Direct Credit is a method of electronically transferring money into a person’s or organisation’s UK bank account — the opposite of a Direct Debit.


It’s commonly used for paying salaries, pensions, supplier payments, refunds, and benefits. It is part of the BACS payment scheme, just like Direct Debits.


1.2. How does Direct Debit work?


1.2.1. Mandate creation and drawdowns


A Direct Debit mandate (also known as a Direct Debit Instruction or DDI) is a formal authorisation given by the payer to the payee (i.e by the customer to the merchant), allowing them to collect payments from the payer’s bank account. The mandate set-up is essentially the customer creating instructions for a PSP (in this case APEXX or our partner Trustly) to be allowed to take funds from a customer’s account.


This is the initial authorisation request which is all API-based, there is no file transfer. 


The customer can set-up a mandate using in one of 2 ways:

  • open-banking [coming soon with APEXX]

  • manual process: the customer would have to manually enter their information. At this point there would be a background check to ensure the information is correct (names, sort code and account number, address). If the check is successful, the mandate goes through the normal authorisation process, if it is declined, then the customer would be made aware. 

 

Once the mandate has been created, the merchant will be allowed to take payments from the customer’s account, called  “drawdowns”. They will be drawn from the customer’s account until the end of the mandate or until it is cancelled or closed. 


 NOTE   

Drawdowns cannot be taken on a closed or cancelled mandate, however it is still possible to process refunds on a closed mandate. 



1.2.2. What is BACS?


BACS (Bankers’ Automated Clearing Services) is the central infrastructure that processes Direct Debit and Direct Credit payments in the UK. 


There is a wide variety of rules around BACS including the fact that it is only available on business days (Mon–Fri, excluding bank holidays). This means that mandate creations and drawdowns will only occur when BACS is available - i.e. on business days. BACS operate with a 3-day cycle for both mandates and drawdowns.



1.2.3. Advantages of Direct Debit


One of the most important features of Direct Debit is the Direct Debit Guarantee, offering strong protection for customers:

  • It is very well known and established.

  • There are little operating costs.

  • It is pro-customer - with full and immediate refunds provided by the customer’s bank for any unauthorised or incorrect payment.

  • It offers flexibility - the merchant can set up ‘non-scheduled payments' meaning that as long as they inform the customer they can change the amount (unlike BNPL where you have to set up the amount upfront).

  • Customers must be given advance notice (usually 3 to 10 working days) before any payment is taken.

  • Customers can cancel a mandate at any time by contacting their bank or the service provider.


Direct Debit flexibility works well with the travel industry (e.g. if a customer wanted to upgrade their airplane seats they would just change the Direct Debit amount.)

 


2. How is Direct Debit implemented at APEXX?


2.1. Direct Debit process 


APEXX have partnered with Trustly to offer the Direct Debit functionality. Mandates and drawdowns are passed on from the merchant to APEXX via file-transfer or API, which are then ingested by APEXX before moving on to Trustly. Once they are ingested, the mandates and drawdowns become part of the APEXX ecosystem and are displayed into the Atomic Portal. 


For the last segment of the process (i.e. after APEXX), Trustly liaises directly with BACS to forward all mandates and drawdowns to ensure they are processed on time and to completion. 


 NOTE 

APEXX recommends using API for Direct Debit and moving away from file transfer owing to several considerations around API including real-time mandate management, secure authentication, and real-time drawdown actions (e.g. cancel, refund etc.). Though APIs do not shorten the 3-day BACS cycle, they improve operational efficiency and error handling.


2.2. In the Atomic Portal


2.2.1. Locating a Mandate


You can view all mandates from the Atomic Portal directly - by either clicking on the Mandates tile on the homepage or on the Mandate icon on the left-hand side menu.



All mandates are displayed on the Mandate page as well as key information such as their associated status (Open or Closed), the Mandate Reference that was used to create the mandate, and the Mandate ID.



 NOTE 

Mandate IDs are an important data point as they allow you to locate a Mandate within the Mandate section, but also to filter out transactions in the Transactions list and identify all drawdowns related to the same Mandate ID (see below section 2.2.2.)


You can copy paste the full mandate ID and use it in the search filter, although it appears truncated on the Portal. 





There are plenty of filters available to sort out out your Mandates including:


  • merchant : this depends on your set-up and configuration with APEXX and whether there are multiple merchant accounts within your hierarchy, and on that has been set-up to only handle direct debit transactions.

  • date: you can select the relevant date range in the date picker.

 NOTE   When you are trying to locate a mandate, ensure that you select the relevant date range using the pre-defined filters (last 7 days, 30 days, or 90 days) or using the calendar. Your results will be filtered out according to the date or date range you are selecting. 

  • currency: the currency of the mandate.

  • status: Open or Closed.


You can click on the Search icon at the top right-hand side to have access to additional filters such as Mandate ID, Mandate Reference etc.





2.2.2. Locating a Drawdown


Head to the Transactions List in the Portal where all your transactions (including card payments) are displayed. 



  • Using the Mandate ID

To locate a drawdown, you need to use the Mandate ID. To do so, select the Mandate ID filter in the search filters, which you can access via the Search button on the top right-hand side corner, and paste the Mandate ID. 






You can recognise a Direct Debit transaction thanks to the Direct Debit logo in the Method column, the Mandate ID you have entered now appears at the top as a filter, and you can see the various drawdowns linked to that same mandate, as well as their current statuses. In the below example,  you can see that 2 drawdowns are marked as Captured (i.e. successful) and one has been Refunded. 




 NOTE 

If a specific merchant account has been configured to handle all your Direct Debit volumes, you can use the All Merchants filter to select that merchant account and filter out only by Direct Debit transactions, but you will still need the mandate ID or merchant reference to locate an individual drawdown.



  • Using the Merchant Reference

You can use the Merchant Reference to locate a drawdown (in the example above it is “PAYMENT62”). Head to the Search filters at the top right-hand side of the screen and simply paste the merchant reference in the Merchant reference field. 


 NOTE   

You cannot use the mandate reference to locate a drawdown as the merchant reference only applies to individual drawdowns and not to the mandate itself.



2.2.3. Information available for drawdowns


There is plenty of information regarding individual drawdowns available from the Atomic portal - as shown in the screenshot below. 




Status: The status at the top (here Captured) is the general transaction status, meaning this is the current status of the transaction. If you want to look at individual transaction events, click on View Transaction History. 

APEXX transaction ID: it is an APEXX-specific reference that is only used within the APEXX ecosystem.

Mandate ID: it is the same one that is available in the Mandate section and is used to locate all associated transactions. 

Merchant reference: it corresponds to the reference for that individual drawdown, not for the mandate itself.



2.2.3. Actions performed via the Atomic Portal


  • Mandate 

 You can cancel a mandate from the Mandate section of the Atomic Portal by clicking on the 3 dots next to the relevant mandate and then on Cancel.


 NOTE  The status after the cancellation will be Closed.



  • Drawdown

It is possible to refund an individual drawdown. To do so, select the relevant drawdown and click on View Transaction History to view individual transaction events.


Click on the arrow next to the Captured transaction event which corresponds to the successful drawdown.


Click on Refund to move onto the refund page






Enter a Refund Reference (here REFUND) and enter the amount. Click on Refund


 

 NOTE   Partial refunds are not supported - you must refund the full amount of the drawdown.



Once the drawdown has been refunded, the general status of the transaction will change from Captured to Refunded, while the refund will be added as a transaction event.




2.3. Adding Direct Debit

 

If you would like to use our Direct Debit feature, please talk to your Implementations Manager (or implementations@apexx.global) if you are an onboarding merchant, or to your Relationship Manager (or relationshipmanagement@apexx.global) if you are already live with APEXX.

Atomic Portal - Transactions https://support.apexx.global/a/solutions/articles/19000166543