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Rapid advancement in technology and the revolution brought about smartphones has had a significant effect on how businesses collect their payments. Direct debit solutions and payment gateways have become more affordable and accessible to business of all sizes. But has it always been this way?

Let’s take a look at how the popular direct debit system has evolved through the ages.

The Evolution of Direct Debit

 The Ice Cream Connection

Direct debit has a rather interesting ice cream connection. It dates back to 1964 when Direct debit first made its appearance in the UK,  a time when the only known payment methods were cash, cheques and the rather rigid and inflexible standing orders. Consumer good giant Unilever found the existing payment options quite limiting to collect payments from the thousands of ice cream retailers. It was at that time that one of their executives, Alastair Hanton, came up with a revolutionary idea to automate payment collection. Why not seek authorisation from their debtors and retrieve appropriate amounts from their bank accounts directly?

Although Hanton’s idea was backed by the company, the concept of 'automatic debt transfer’ sent shock waves through the conservative banking establishment of the day. It took years for Unilever to convince their bank and suppliers about the merits of the system and get them on board. And following their sustained efforts, the group finally succeeded in getting the direct debit system - or 'automated debt transfer’ as it was called then - on its wheels by 1968.

A System Out of Bounds for SMEs

By 1970 the system started gaining popularity outside the confines of Unilever. It was followed by a surge in growth over the next two decades. However, convenient as it was, direct debit remained the forte of large, corporate businesses well into the 21st century. It remained out of bounds for most SMEs, small organisations and individuals.

Direct debit was expensive, time-consuming and available only through banks with large bonds of £100k or more.  Once approved, the maintenance and running costs were also high and required designated full-time staff to set up, administer and manage the system. There was also a long waiting period of up to six months to get approval for the scheme.

The Advent of Modern Direct Debit

With the advancement in technology, independent direct debit providers like GoCardless made their entry in the early 2000s to level the playing field. Innovative digital solutions were brought in to make direct debit and other online payment systems accessible and affordable to smaller businesses and organisations.

The fintech revolution transformed direct debit from the clunky, pre-digital system that it was to a faster, affordable and automated post-digital system. Industry-specific requirements began to be factored in by fintech providers, and innovative tracking and reconciliation features were added on to direct debit to improve transparency and enhance the customer experience.

Automated Direct Debit for the Childcare Industry

Cheqdin is among the pioneers in introducing an industry-specific direct debit solution for the childcare sector. Cheqdin joined hand with GoCardless to integrate direct debit collection into our cloud-based childcare management system. Using the best in technology, we automated direct debit collection and streamlined it with invoicing and payment reconciliation, bringing in a host of advantages of preschools and out-of-school clubs:

Transparent and Cost-effective: No setup costs or hefty bonds. As Cheqdin’s direct debit is available as part of a full-fledged childcare management software, you only pay the monthly/annual subscription fee for the software and a small transaction fee for successful transactions

Simple setup and customer migration: Quick and easy to set up. Easy to add new and existing customers and start payment processing instantly

Flexibility to accommodate multiple payment options: A unique invoice-linked system allows childcare providers to give their customers the flexibility to pay part of their bills by alternate methods such as childcare vouchers

Automatic reconciliation and payment tracking: Reduced admin with automatic reconciliation, payment tracking and real-time alerts

Evolving technology and has enabled fintech providers like us to open up direct debit and other online payment options to sectors and SMEs that were once considered too small for business by the banking establishments.

The idea that was conceptualised by Alastair Hanton continues to move ahead with the times - creating a revolutionary system that is within reach for businesses of all sizes.


Interested in collecting your childcare payments via Cheqdin's Direct Debit?

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