A standing order is an instruction a bank account holder gives to their bank to pay a set amount at regular intervals to another's account. The instruction is sometimes known as a banker's order. They are typically used to pay rent, mortgage or any other fixed regular payments. Because the amounts paid are fixed, a standing order is not usually suitable for paying variable bills such as credit cards or gas and electricity bills. Standing orders are available in the banking systems of a number of countries, including Germany, Bulgaria, the United Kingdom, Barbados, Ireland, India, Netherlands, Russia, Pakistan, Malaysia, Ukraine, Sri Lanka 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.
Country differences
Germany
A standing order can run for a set number of payments, a set period of time, or until cancelled.
The Netherlands
Standing orders are available for a set period of time or until cancelled, to any recipient in the SEPA space. They should not be confused with doorlopende machtigingen.
Japan
A standing order runs until cancelled. They can be cancelled at the account holder's request.
New Zealand
Commonly known as "Automatic Payment" and can be set up via a bank teller at a branch of the bank, or via the internet banking service of most major banks.
South Korea
A standing order runs until cancelled. They can be cancelled at the account holder's request. The bank charges fees per transfer.
Spain
With most Spanish banks a standing order can be set up to run for a set period of time, for a number of occurrences or indefinitely. They can be cancelled at any time at the account holder's request. There are typically no fees for such transactions.
Switzerland
In Switzerland standing orders are available for a set period of time or until cancelled. They can be made to any recipient in the SEPA space.
UK & 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 slowerBACS system; with this method payments reach the receiving account the same day, rather than after a delay of three days or more.
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 be set up and modified only by the payer, and is for amounts specified by the payer to be paid at specified times. 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 authorize the payee take a direct debit for any amount at any time, or to instruct the bank to honour direct debit requests from a specified payee. The payee has full control over the payments. They can vary the amount and frequency of payments without further authorisation from the customer. 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.
