Standing order (banking)
A Standing Order (or a Standing Instruction) is an instruction a bank account holder gives to their bank to pay a set amount at regular intervals to another account. The instruction is sometimes known as a banker's order.
They are typically used to pay rent, mortgage or other fixed regular payments. Because the amounts paid are fixed, a standing order is not usually suitable for paying variable bills such as credit card, or gas and electricity bills.
Standing orders are available in the banking systems of several countries, including Germany, the United Kingdom, Barbados, the Republic of Ireland, Netherlands, Russia and presumably many others. In the United States, and other countries where cheques are more popular than bank transfers, a similar service is available, in which the bank automatically mails a cheque to the specified payee.
[edit] Country differences
[edit] Germany
A standing order (Dauerauftrag) can run for a set number of payments, a set period of time, or until cancelled.
[edit] The Netherlands
Standing orders (doorlopende machtigingen) are not available for a set period of time. They run until cancelled.
[edit] Japan
A standing order (口座自動振替) runs until cancelled. They can be cancelled at the account holder's request.
[edit] South Korea
A standing order (납부자자동이체) runs until cancelled. They can be cancelled at the account holder's request. The bank charges fees (average 300KRW) per transfer.
[edit] Spain
A standing order can be set up to run for a set period of time, not indefinitely. They can be cancelled at the account holder's request.
[edit] UK and Ireland
A standing order can be set up to run for a set period of time, or indefinitely, and can be cancelled at the account holder's request. Standing orders are standardized by the trade body UK Payments Administration. In 2008 a number of banks began to introduce Faster Payments as the method of transfer for standing orders when available, in place of the slower BACS system; with this method payments reach the receiving account the same day, rather than after a delay of three days or more.[1]
[edit] Difference from Direct Debit
Standing orders are distinct from direct debits; both are methods of setting up repeated transfers of money from one account to another, but they operate in different ways. The fundamental difference is that standing orders send payments arranged by the payer, while direct debits are specified and collected by the payee.
- A standing order can only be set up and modified by the payer, and is for amounts specified by the payer to be paid at specified times (usually a fixed amount at a specified interval). The amount can be paid into any bank account, which need not belong to an organisation vetted by the payer's bank.
- A direct debit requires the payer to instruct the bank to honour direct debit requests from a specified payee; the payee can then take a direct debit for any amount at any time. The payer has no direct control over these payments, but can cancel the direct debit at any time, with no reason required, and require the return of disputed payments. It is not possible to authorise an individual to take direct debits; only organisations that have a contract with the payer's bank, or have been vetted by it, can do this. For details and country differences, see direct debit.
