Use direct debit for anything that repeats, such as a monthly retainer or subscription, and open banking (pay by bank) for one-off invoices, new clients and money you want today. The difference is who has to act: with open banking your customer approves every payment, while a direct debit collects on the date you set until they cancel it. Many businesses use both.
In this article
The short version
- Use direct debit for recurring fees and open banking for one-offs and money you need today.
- Open banking needs your customer to approve every payment; a direct debit doesn't.
- An unpaid open banking invoice tells you nothing; a failed direct debit reports back.
- On Adfin both cost 1% + 20p with the percentage capped at £4.
- A client can pay a first invoice by pay by bank, then sign a mandate for later fees.
How the two differ
Open banking, often called pay by bank, is a bank transfer your customer starts. You send a link, they pick their bank, and the payment opens in their banking app with your details, the amount and the invoice reference already filled in. They approve it and the money travels over Faster Payments, usually arriving within seconds. Nothing carries over to the next invoice: next month, they approve again.
A direct debit works the other way round. Your customer signs a mandate once, which lets you collect from their account. Before each collection you tell them the amount and the date, and the payment then goes through Bacs, the UK's three-day collection cycle. Your customer doesn't have to do anything, and the amount can change from month to month as long as you give notice.
So open banking is a payment your customer makes each time. A direct debit is a standing permission for you to collect.
Which to use for which invoice
| Your situation | Usually the better fit |
|---|---|
| Monthly retainer or subscription | Direct debit |
| Fee that varies each month | Direct debit, with notice of each amount |
| One-off invoice for a new client | Open banking |
| Deposit before you start work | Open banking |
| Money you need in the account today | Open banking |
| Client who often pays late on recurring work | Direct debit, if they'll sign a mandate |
The two aren't really competing. A new client can pay their first invoice by pay by bank, then sign a mandate so later fees collect themselves. That's two steps, one after the other, and both can be set up from the same invoice and payment link.
What happens when a customer doesn't pay
With open banking, every invoice needs your customer to open the email, click the link and approve the payment. Most do. Some get busy, some forget, and some are short of cash that week. When that happens, nothing tells you. There's no failed payment, because no payment was attempted, and the invoice just sits in your ledger until someone notices and chases it.
A direct debit works differently. Once the mandate is in place, your customer pays unless they actively stop it. If a collection fails because the money wasn't there, or the mandate is cancelled, your provider is told through the Bacs messaging system and you find out within days, without having to go looking.
Across Adfin, invoices set to collect automatically (which almost always means a mandate is in place) were paid 98.0% of the time, against 90.8% for invoices where the customer had to choose to pay. That gap isn't all down to the method. Clients who agree to a mandate may differ from those who don't, so some of it reflects the relationship as well as the mechanism. Even so, the gap is wide enough to make it worth moving recurring fees onto direct debit wherever clients will agree.
If you do rely on payment links, the follow-up decides how much you end up chasing by hand. Adfin's Customer Agents can send reminders with the same pay by bank link over email, SMS or WhatsApp on a schedule you set, and retry or chase a failed direct debit, within rules you approve.
Speed, cost and refunds
With open banking, the money moves as soon as your customer approves. On Adfin, pay by bank payments reach your account the same day, while direct debits arrive within three working days of the collection date. If cash is tight this month, a pay by bank link is the quickest way to get money in.
Direct debit takes longer, but you know weeks ahead what will be collected and when, which makes your cash flow easier to plan.
On cost, compare the rates you're quoted on your own invoice sizes. On Adfin both cost 1% + 20p per successful payment with the percentage capped at £4, plus 0.3% on direct debits above £2,000, so on most invoices the choice between these two isn't about price. Both are usually cheaper than card on larger invoices, because card fees aren't capped.
An open banking payment can't be reversed by your customer once it's sent, and there's no chargeback, so any refund comes from you. A direct debit is covered by the Direct Debit Guarantee, under which your customer's bank refunds them straight away if a collection was made in error, and then reclaims it from you.
Common questions
Is open banking or direct debit better for collecting invoices? Direct debit suits recurring fees, because your client authorises once and later payments happen without them. Open banking suits one-off invoices, new clients and money you want today.
Which gets paid more reliably? Usually direct debit. Across Adfin, invoices set to collect automatically were paid 98.0% of the time, against 90.8% where the customer had to choose to pay.
Which is faster? Open banking. The money moves within seconds, and Adfin pays it out the same day; direct debits arrive within three working days of the collection date.
Is open banking cheaper than direct debit? On Adfin both are 1% + 20p per successful payment, with the percentage capped at £4, though direct debits above £2,000 carry an extra 0.3%. Other providers' pricing varies, so check yours.
Can a customer reverse an open banking payment? No. Once a Faster Payment is sent it can't be cancelled or charged back, so any refund comes from you.
Can the same client use both? Yes. A client can pay a one-off invoice by pay by bank and have their monthly fee collected by direct debit.
Sources
- Bacs - Direct Debit (accurate as of October 2026) https://www.bacs.co.uk/bacs-schemes/direct-debit/
- Direct Debit - The Direct Debit Guarantee (accurate as of October 2026) https://www.directdebit.co.uk/direct-debit-guarantee/
- Pay.UK - Faster Payment System (accurate as of October 2026) https://www.wearepay.uk/what-we-do/payment-systems/faster-payment-system/
- Adfin - Pricing (accurate as of October 2026) https://www.adfin.com/pricing
- Adfin - Next-generation direct debit (accurate as of October 2026) https://www.adfin.com/direct-debit-payments
