Direct Debit vs Auto Debit – What’s The Difference?

In Malaysia, the term Direct Debit and Auto Debit are commonly used interchangeably and misunderstood as the same thing.

While both are methods of automatically collecting recurring payments, there are significant differences between the two that if confused for one another, can mean a world of difference for the business collecting payments.

To learn how to differentiate the two and find out which is best for you and your business, read our comparison below on the difference between Direct Debit vs Auto Debit and you’ll never make the same mistake again!

Note: Direct Debit, Auto Debit and standing instructions are all different payment collection methods. In this article, we only cover the first two. As for standing instructions, that’s for another day!

The Major Difference

Direct Debit is an automatic payment method that allows a business to pull payments directly from their customers’ bank account. It’s the easiest way for a customer to make regular or recurring payments to a business. Auto Debit (sometimes referred to as Continuous Payment Authority or CPA in the UK), on the other hand, also collects payments on a recurring basis. But instead of from their bank account, it collects payments from a debit or credit card.

In short:

Direct Debit = Regular or recurring payments collected automatically from a bank account.

Auto Debit = Regular or recurring payments collected automatically from a credit or debit card.

Comparing the two

So, that’s all there is to it?”

Well…not really. Due to the method of collection, there are several side effects that you, as a merchant or business owner are definitely going to want to take into consideration seeing as it might affect cash flow and conversion rates.

Fret not, there’s a reason why the two are so confusing!

But we don’t blame you for mistaking one for the other. This common misconception is brought about due to the way both automatic payment methods are generally marketed in Malaysia. What with Auto Debit commonly being branded as Direct Debit and vice versa.

Take Maxis’ Direct Debit for example. It’s described as a payment instruction from you to Maxis which authorises Maxis to collect your bill charges from your credit/debit card account. The bill is deducted automatically at your regular bill cycle.

Did you catch that? “Collect your bill charges from your credit/debit card account” This means that Maxis’ Direct Debit is actually an Auto Debit service as it collects payments from credit/debit cards instead of directly from the bank account!

Remember, Auto Debit = Collected from credit/debit card. Whereas Direct Debit = Collected from bank account.

Which is better?

Both Direct Debit and Auto Debit are more efficient methods of collecting payments as compared to other payment methods.

Despite this, Direct Debit has the capability to cater to a wider audience and be more low-cost. This is due to the low percentage of credit card users in Malaysia, which severely limits the reach of businesses who offer Auto Debit.

Additionally, the high fees of processing transactions through the global Visa and Mastercard networks, especially when compared to that of Direct Debit, ensure that this is a costly method to run for businesses.

Find out if it’s time for your business to offer a new payment method by reading this article on whether or not your business needs a change in payment methods!

How does Curlec stand out?

With all that said, what makes Curlec different from the rest?

Curlec is the pioneer Direct Debit company in Malaysia. While companies offering Direct Debit services in Malaysia aren’t very many to say the least, they tend to be heavily paper-based and manual, many with long processing times and high rejection rates.

Curlec manages to stand out and make the process even more efficient for both merchant and customer alike by digitising the sign up process and offering the option of auto collection and account reconciliation, ensuring payments are collected in a seamless, affordable and worry-free way.

Uniquely in Malaysia, Curlec’s Direct Debit also accepts locally issued credit cards.

Wonder if your business can benefit from implementing Direct Debit? HINT: It helps to save admin work, reduce costs and improve cash flow!

Find out by asking us here!