Payment Instruments: Direct Debits

By Denise Bedell

Use of Direct Debits by Non-Banks (number of transactions (millions, total for the year))

Use of Direct Debits by Non-Banks (value of transactions (US$ billions, total for the year))

According to the Bank for International Settlements (BIS), a direct debit is a preauthorised debit on a payer's bank account initiated by the payee. It is also known as a pre-authorized debit (PAD) or pre-authorized payment (PAP).

Direct debits account for a significant portion of the payments market in just a few BIS Committee on Payment and Settlement Systems (CPSS) member countries, particularly Australia, Brazil, the US and Germany.

In 2009, direct debits accounted for 38.8% of Australian non-bank payments; 19.2% of Brazilian payments; 17.9% of overall payments in the US; and 17.0% of German payments, by value of all transactions. In all other CPSS countries, direct debits account for less than 10% of the market.

Nonetheless, the number of direct debit transactions has increased in all CPSS countries since 2005. By number of transactions, the US has the most active direct debit market and saw the most dramatic rise in number of transactions between 2005 and 2009—going from 7.19 billion transactions in 2005 to 11.03 billion by 2009.

Sweden also saw usage figures increase dramatically over the time period, going from 160 million direct debit transactions in 2005 to 241 million in 2009.

Most CPSS countries that report direct debit figures have also seen growth in the overall value of transactions. The overall value of CPSS country direct debit transaction volumes grew from $20.64 trillion in 2005 to $37.4 trillion in 2009.

Germany saw a marked change in the value of direct debit transactions over the time period. Total value of transactions rose from $4.19 trillion in 2005 to $15.82 trillion in 2009. However, it is accounted for by a change in reporting methodology, according to the BIS. A BIS spokesperson explains: "Cross-border transactions and book-entry transactions are included after 2007, but not included before."

Data is from the Bank for International Settlements' Committee on Payments and Settlement Systems (CPSS) Annual Payments Statistics, March 2011.

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Use of Direct Debits by Non-Banks (number of transactions (millions, total for the year))

* Different methodology and data collection method since reporting year 2007.

Use of Direct Debits by Non-Banks (value of transactions (US$ billions, total for the year))

* Different methodology and data collection method since reporting year 2007.

**Sum or average excluding those countries for which data are not available.