Banks are keen to encourage us to use them for direct debits. Some require your to have direct debits with them to earn perks (like cashback). Monzo doesn’t do this but does have features to try to encourage you to use it for direct debits (such as bill pots).
Do banks directly earn any money from direct debits (something similar to interchange for card payments)?
Or is the desire to incentivise direct debit use entirely because it makes it more likely you will use that bank as your main bank and therefore easier to sell various financial products to you?
The customer bank simply sees it as a Bacs transfer out more or less.
The company that collects direct debits, depending on the setup pays fees to do direct debits. But normally it is a flat fee per batch submission, thus relatively cheap and competitively priced.
Not unlike lots of other industries, shops are a classic example. 9p baked beans or cigarettes in a local corner shop. Almost no money or more likely a loss is made but it gets you into the store and hopefully you’ll buy something else.
Don’t they? I thought that if you don’t pay X amount in each month and have at least one active direct debit, then you have to pay for replacement cards and a fee on cash withdrawals over a limit.
Point of the statement was incentives might not only be financial. Monzo, for example, appear to feel it’s worthwhile investing effort into making the bill paying (generally direct debit) experience appealing compared to typical banks.
It’s more for you to stay put. If you don’t have direct debits you’re unlikely to pay salary or keep money in it and since we’re lucky to have free banking in this country they need to find ways to sell you profitable lending when you’re more committed.