Bacs Direct Debit

How a Bacs Direct Debit moves through Stripe

With a mandate already in place, a payment created before the 20:00 London cutoff is submitted the same business day. The money typically leaves the customer’s account at T+2, Stripe marks the payment successful at T+3 (21:00 UTC), and the funds are available at the start of T+4.

A first payment takes longer, because the mandate has to be lodged with the customer’s bank before anything can be collected. Stripe’s timeline for a new mandate is: mandate submitted at T+0, mandate active and payment submitted at T+3, funds leave the customer’s account at T+5, and funds available in Stripe at T+7.

That gap matters for subscriptions. Stripe warns that a subscription can become active while its first payment is still processing, so a new subscriber can be using a service for about a week before anyone knows whether their bank will pay. Stripe’s advice is to wait for the invoice.paid event, or a succeeded PaymentIntent, before treating the first payment as collected.

Mandates, the Direct Debit Guarantee and notifications

Every Bacs debit needs a mandate, which Bacs calls a Direct Debit Instruction. It authorizes one-off and recurring debits from the account. Stripe records the business name, the acceptance details and the Bacs mandate reference on the Mandate object, and a customer can cancel at any time through you or through their bank. When a mandate is rejected, cancelled or reactivated, Stripe sends a mandate.updated event. The Stripe mandate glossary entry covers the object itself.

Every UK Direct Debit is also covered by the Direct Debit Guarantee, which all banks and building societies that accept Direct Debit instructions offer. If an error is made in a payment, by the business or by the bank, the payer is entitled to a full and immediate refund from their bank. The Guarantee also says that changes to the amount, date or frequency are normally notified 10 working days in advance, and that a payer who receives a refund they were not entitled to must pay it back when asked.

Bacs requires telling customers when their details are collected and each time you debit them. Stripe sends those emails by default. By default, the customer’s bank statement names Stripe as the service user and shows the mandate reference. Custom Branding replaces Stripe’s name with yours for 50 GBP per active month, and new mandates show your name 5 business days after you request it.

Failures, disputes and refunds

A Bacs payment can come back in three ways, and each one can land in a different period.

A failure happens before the payment succeeds, and Stripe attaches a failure code that explains why. With Stripe Billing’s Direct Debit retries switched on, Stripe retries insufficient-funds failures up to 2 times, within 30 days of the first attempt, and does not charge failure fees for those automatic retries.

A dispute happens after the payment succeeds, and Bacs disputes have no time limit. Stripe deducts the amount and the dispute fee from your balance when the dispute is created, you cannot submit evidence, and the fee is not refunded. A dispute can also be a late failure in disguise: when a bank reports a failure after Stripe has marked the payment successful, Stripe records it as a dispute with a reason code.

A refund is something you choose to do, for up to 180 days after the payment, and it takes 3 to 4 business days to arrive. Because refunds are provided outside the Bacs scheme, Stripe warns that a customer can still dispute the payment after a refund, and you can lose both the refunded and the disputed amount. Stripe’s advice is to tell the customer you are refunding, and to refund only after the original payment has fully settled.

What it costs

Stripe’s UK pricing page lists Bacs Direct Debit at 1% of each payment, with a minimum fee of 20p and a cap of 4.00 GBP, plus 5.00 GBP for each disputed payment and 2% when currency conversion is required. The minimum applies below 20 GBP and the cap above 400 GBP, so a 1,200 GBP annual membership costs 4.00 GBP to collect.

The dispute fee is a cost with no sale attached, and with Bacs it never stops accruing on old payments. A ledger that tracks only sales and processing fees will drift from the Stripe balance by the amount plus 5.00 GBP every time a customer claims under the Guarantee, including for payments from periods you have already closed.