What Is a Standing Order and How Does It Differ From a Direct Debit

A standing order is a regular payment that you set up with your bank to send a fixed amount to another account on chosen dates. It is commonly used for rent, savings, subscriptions, or repeat payments where the amount does not change.

A direct debit works differently because you give a company permission to collect money from your account. The amount can change, as long as the company tells you in advance.

Both payment methods help automate regular payments, but they give control to different sides. With a standing order, you control the amount and schedule. With a direct debit, the organisation manages the collection under your authorisation.

In this blog post, we explore what a standing order is and the primary differences between it and direct debits.

What Is A Standing Order?

A standing order is an order or further authorisation given to your bank or financial institution in which you set up regular, fixed and recurring payments to an organisation or an individual from your bank account. 

From the perspective of frequency, standing orders can be:

• Weekly standing orders;
• Monthly standing orders;
• Bi-annual standing orders;
• And more.

Standing orders are fully controlled by the account holder, who can create, change, or cancel them. They are especially popular in the UK and are widely used with current accounts, mobile banking apps, and online banking platforms. 

In 2024, there were 560 million standing orders in the UK, where this number is expected to reach596 million in 2034.

Overall, they’re an effective way to save time on performing redundant tasks.

How Standing Orders Work  

The first step is to create the standing order via your bank. You can do this by visiting a local branch, by using your online banking, or through a mobile app. 

You’ll need to enter the recipient’s details, like name, sort code, account number, and define your payment terms. This includes specifying the standing order payment date, amount, and frequency.

After the setup, the process runs automatically. The bank will automatically send money on the scheduled date, and the funds will be transferred directly to the recipient’s account until the standing order is modified or cancelled.

Examples Of Standing Orders In The UK  

You can make standing orders for a variety of regular payments that are at a fixed amount. 

You could have a standing order for savings, a standing order for charity, or a standing order for family.

In the UK, for example, standing orders for rent are very popular. Many tenants across cities like London, Manchester and Birmingham can prefer to set up standing orders to pay their landlords on the same date each month. 

Other popular examples of standing orders include paying your monthly mortgage amount or sending a fixed sum to your child away at university each month. 

Advantages And Disadvantages Of Standing Orders  

Standing orders come with both advantages and certain disadvantages. Let’s explore some of these in more detail below.

Standing Order Advantages

Standing orders are popular because they make managing regular payments easier, more reliable, and stress-free.

The main advantages of standing orders include:

• Full control – You decide the amount, date, and frequency, and can change or cancel it anytime.
  
• Simple setup – Quick and easy to create via online banking, mobile apps, or your bank.
  
• Usually free – Most UK banks don’t charge for setting up or using standing orders.
  
• Predictable payments – Fixed amounts and dates make budgeting and planning much easier.
  
• Time-saving – Eliminate the need to repeat the same manual payments every month.

These advantages make them a preferred option for some individuals. 

Standing Order Disadvantages 

While standing orders are useful for fixed payments, they do come with a few limitations worth considering.

The key drawbacks of standing orders are:

• Lack of flexibility – The payment amount is fixed, so it’s not ideal for bills that change, like utilities.
  
• Manual changes required – You must update the amount or date yourself if anything changes.
  
• Risk for businesses – Customers can cancel at any time, which may lead to missed or inconsistent payments.
  
• No automatic adjustments – Payments won’t adapt to price increases or changes unless you intervene.

In general, standing orders work best for predictable payments but can be less suitable when flexibility or variable amounts are needed.

Electricity or water bills that vary based on usage, credit card bills with different balances each month, or mobile phone bills with extra charges or roaming fees are all examples of scenarios where standing orders won’t be useful.  

Standing Order Vs Direct Debit  

The differences between standing order and direct debits come from four characteristics:

• Control – While a standing order is fully controlled by the payer, a direct debit is controlled by the company or organisation that is being paid.
  
• Fixed vs variable amounts – Standing orders are typically used for fixed payments as the amount stays the same every time, while direct debits are usually variable.
  
• Setup process – To set up a standing order, the payer goes through their bank or financial institution, provides the recipient’s details, and defines the amount, date, and frequency. On the other hand, a direct debit is set up by the company or organisation that is being paid.
  
• Use cases – Standing orders are best fit for predictable, fixed payments, like rent, while direct debits are more suitable for variable or ongoing bills, like utilities.  

When it comes to fees, a direct debit has a low set-up and management cost, if any at all. For example, setting up Direct Debit with myPOS is free. At the same time, some providers charge 1% +20p (+VAT) per UK domestic transaction. 

On the other hand, standing orders are free for both the business and the consumer. .

Key Differences Between Standing Orders And Direct Debits Summarized  

Both standing orders and direct debits are used for regular bank payments in the UK, but they differ in how they are set up, controlled, and adjusted over time.

The following table summarises the core differences between the two:

Feature	Standing Order	Direct Debit
Who sets it up	Set up by the customer through their bank	Set up by the company with customer authorisation
Who controls it	Fully controlled by the customer	Controlled by the company that collects the payment
Payment amount	Fixed amount each time	Can be fixed or variable, depending on the bill
Changes to payment	The customer must manually change or cancel it	The company can adjust the amount (within agreement terms)
Flexibility	Low flexibility (fixed schedule and amount)	High flexibility (payments can vary)
Protection in the UK	No dedicated protection scheme; Customers are protected by the Payment Services Regulations	Covered by the Direct Debit Guarantee, protecting customers against incorrect or unauthorised payments
Typical use cases	Rent, savings transfers, family payments	Utilities, subscriptions, phone bills, credit cards

What Happens If You Don’t Have Enough Funds  

In the case of insufficient funds, with standing orders, you may incur a penalty fee, and it could take some time for you to notice because of the absence of notifications to that effect.

With direct debit payments, you are more likely to get notified immediately by your bank or financial institution. 

Because standing orders are made for fixed payments regularly, there is some flexibility in terms of payments, but not much. With direct debits, on the other hand, such as for a telephone bill, which may fluctuate each month, there is much more flexibility offered in terms of how much the provider can draw from your account. 

As for direct debit, you can take advantage of the Direct Debit Guarantee, which enables you to get a refund in the event of funds being erroneously or fraudulently taken from your account.

How To Set Up A Standing Order In The UK  

Setting up a standing order in the UK is usually a quick process that can be done through online or mobile banking, or sometimes directly with your bank.

The usual steps are as follows:

1. The first step is to log into your online or mobile banking. Most UK banks now allow standing orders to be created digitally without even visiting a branch.
   
2. Next, enter the recipient account details, including information such as their sort code and account number.
   
3. The third step is to choose how much money you want to send and how often it should be paid.
   
4. Finally, select the date you want the payments to begin and review all the details. 

Once you confirm, the standing order is activated, and your bank will automatically send the payments on the scheduled dates. 

How To Cancel Or Change A Standing Order   

You can cancel or change a standing order mandate anytime using your banking app, online banking, or by visiting a branch. Note that the cancellation process can vary from bank to bank.

Changes usually apply immediately to future payments, giving you control over the standing order transaction time and allowing you to adjust the amount, date, or frequency without contacting the recipient.

Standing Orders And Payments For UK Businesses  

Standing orders are a convenient way for UK businesses to receive recurring payments from customers. Once set up, payments arrive automatically, which helps create more predictable income.

However, they do have limitations compared to modern billing systems, which we look into in the next section.  

Tools such as POS systems or platforms like myPOS can help by enabling card payments and real-time transaction tracking, making it easier to manage cash flow while still supporting traditional standing order payments.

Limitations Of Standing Orders For Businesses  

A key limitation of standing orders for businesses is that customers can cancel at any time without needing approval from the business. This means payments can stop suddenly, which is likely to affect cash flow.

Another issue is that there is no automatic payment tracking or adjustment. Companies don’t have visibility into changes in customer circumstances, and payments don’t update automatically if prices change or invoices vary.

Finally, standing orders offer limited flexibility for variable billing. Since payments are fixed, they don’t work well for services where the cost changes from month to month.

Common Mistakes When Using Standing Orders

One of the biggest mistakes is using standing orders for variable payments.

Since they’re designed for fixed amounts, they don’t work well for bills that change each month, which can lead to underpaying or overpaying.

Another issue is forgetting to update payment amounts. If rent increases or terms change, the standing order won’t adjust automatically, so it needs to be manually updated to stay accurate.

It’s also important to monitor your account balance. If there aren’t enough funds available on the payment date, the transfer may fail, which can lead to missed payments or unnecessary complications.

Conclusion

In conclusion, you typically set up a standing order for fixed, regular payments. A direct debit, by contrast, is an agreement that allows a company or organisation to withdraw an agreed amount from your merchant account to pay bills or subscriptions. 

Before making use of standing orders as a business, consider their benefits and drawbacks and determine whether they’re a suitable option for your customers.

Disclaimer: Please be aware that the contents of this article and the myPOS Blog in general should not be interpreted as legal, monetary, tax or any other kind of professional advice. You should always seek to consult with a professional before taking action, since the particulars of your situation may materially differ from other cases.

Frequently Asked Questions 

How long does a standing order take?

A standing order usually takes one working day to reach the recipient’s bank account after it is processed. The exact timing can vary slightly depending on the bank’s standing order clearing time and when the payment is scheduled.

How do missed standing order payments impact my supplier relationships?

Missed standing order payments can lead to delayed cash flow for your supplier, which may affect trust and reliability in the relationship. If it happens occasionally, it’s usually manageable, but repeated missed payments can result in stricter payment terms, reduced flexibility, or even service interruptions.

How do I handle price increases if clients pay me via standing order?

Standing orders don’t update automatically, so if your prices increase, you’ll need to inform your clients and ask them to manually change their standing order amount with their bank. Until they do, the old amount will continue to be paid, so it’s important to communicate changes clearly and in advance to avoid underpayments.

What happens if there’s a standing order failure?

In some cases, if funds aren’t available, there could be a standing order payment failure, and a standing order retry process may follow, depending on the bank’s system.

Where can standing orders be found?

Each payment appears on your statement with a standing order payment reference, helping you track transactions easily.