GLOBAL PAYMENTS KNOWLEDGEISO 20022 / SWIFT / SEPA / MT / MX
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Bacs Direct Debit

A biller pulls a bill from a customer's account over Bacs' three-working-day cycle under a Direct Debit Instruction, with unpaid items returned through the ARUDD cycle a day or two after settlement.

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Contributor Shubham Mathure

STEP 1 / 6INTERNAL

A mandate already exists

Riya (payer) → Asha Traders (collector/biller)

Before any money moves, Riya set up a Direct Debit Instruction (the mandate) authorising Asha Traders to pull agreed amounts from her account. The mandate is what makes a Direct Debit a PULL, and it is governed by the Direct Debit Guarantee — the payer's promise of an immediate refund from her own bank if a Direct Debit is taken in error.

Step 1 of 6: A mandate already exists

  1. 01Processing
    A mandate already existsRiya (payer) → Asha Traders (collector/biller)
  2. 02Message
    Asha Traders submits the collection fileAsha Traders (collector/biller) → Bacs (Pay.UK) · Bacs Standard 18 collection file
  3. 03Clearing obligation
    Bacs processes and passes entries to the banksBacs (Pay.UK)
  4. 04Settlement
    The banks settle in central bank moneyBank Alfa (payer bank) → Nordbank (collector bank)
  5. 05Posting
    Riya's account is debitedBank Alfa (payer bank)
  6. 06Posting
    Asha Traders' account is creditedNordbank (collector bank)
MESSAGECLEARING OBLIGATIONSETTLEMENTPOSTING
Full step-by-step text (works without JavaScript)
  1. 01Processing
    A mandate already existsRiya (payer) → Asha Traders (collector/biller)

    Before any money moves, Riya set up a Direct Debit Instruction (the mandate) authorising Asha Traders to pull agreed amounts from her account. The mandate is what makes a Direct Debit a PULL, and it is governed by the Direct Debit Guarantee — the payer's promise of an immediate refund from her own bank if a Direct Debit is taken in error.

  2. 02Message
    Asha Traders submits the collection fileAsha Traders (collector/biller) → Bacs (Pay.UK) · Bacs Standard 18 collection file

    On day one Asha Traders sends its collection file to Bacs through its own bank, Nordbank. The file lists Riya's bill of GBP 90.00 against her mandate. This is an instruction to collect — no money has moved yet.

  3. 03Clearing obligation
    Bacs processes and passes entries to the banksBacs (Pay.UK)

    On day two Bacs validates the file and passes the entries to each bank, so Bank Alfa learns it must pay and Nordbank learns it will receive. This calculates who owes whom — obligations, not money in the account yet.

    Processing produces obligations. Bank Alfa now owes the collection and Nordbank is due it, but nothing settles until day three.

  4. 04Settlement
    The banks settle in central bank moneyBank Alfa (payer bank) → Nordbank (collector bank)

    On day three the obligations from day two settle across the banks' accounts at the Bank of England. Only now does money actually move between Bank Alfa and Nordbank — this is the moment the collection becomes real interbank money.

    • DR Bank Alfa settlement account — GBP 90.00
    • CR Nordbank settlement account — GBP 90.00
  5. 05Posting
    Riya's account is debitedBank Alfa (payer bank)

    On the same day three, Bank Alfa books the debit against Riya's account under her mandate. The GBP 90.00 has now left the payer — the pull authorised in advance has been taken.

    • DR Riya's current account at Bank Alfa — GBP 90.00
  6. 06Posting
    Asha Traders' account is creditedNordbank (collector bank)

    Nordbank credits Asha Traders on day three, alongside Riya's debit and the interbank settlement. The three-day cycle is complete end to end: payer debited, banks settled, collector credited — all on day three.

    • CR Asha Traders' account at Nordbank — GBP 90.00

What this simplifies: One collection through one three-working-day cycle with direct participants. Real Bacs processing batches large volumes, often runs through a sponsoring bank, and carries many return and amendment reason codes beyond the single ARUDD path shown.

LEARN THE CONCEPTS BEHIND THIS FLOW

Sources for this flow2
  1. Scheme-specific rule

    Bacs (Direct Debit and Direct Credit) ↗ — Pay.UK

    Describes Bacs, operated by Pay.UK: sterling Direct Debit (pull) and Direct Credit (push) processed on a three-working-day cycle (submission, processing, entry), with Direct Debit returns handled through the ARUDD cycle. · Checked 2026-07-14

    Bacs runs a fixed three-day cycle: day 1 submission, day 2 processing, day 3 debit and credit taken together. Direct Debit adds days 4-5 for the Automated Return of Unpaid Direct Debits (ARUDD).

  2. Simplified educational illustration

    Payments Signal editorial teaching models — Payments Signal

    This site's own simplified teaching models. · Checked 2026-07-12

    What this simplifies: One collection on a single three-day cycle; batching of many items, sponsor/indirect submission arrangements, and the full set of Bacs return reason codes are omitted.

    Used wherever diagrams, scenarios, figures, or example values are didactic constructions rather than sourced facts; every such use carries a simplifications disclosure. All people, companies, banks, and list entries in examples are fictional.