Direct Payment

Last Updated: August 18, 2011

Definition - What does Direct Payment mean?

A direct payment is a form of electronic bill payment for consumers that allows them to pay their bills for services or products over the Internet through their banks. Direct payment transactions occur in the form of a money transfer from a user's account arranged either through an online bank or a brick-and-mortar financial institution, which provides users with an account and routing number for the party they wish to make electronic payments to. Direct payments are used by customers who have ongoing bills, allowing them to authorize regular monthly withdrawals by companies as payment for those bills. Direct payments should be confused with online bill payments, however, which are single transactions.

Techopedia explains Direct Payment

Direct payments are made in a secure Web transaction environment and can be made by providing a routing number to the bank, which will allow the transaction to be conducted nearly in real time. Payments may be processed immediately or by the end of the banking day. Once direct payments are authorized, they can't typically be halted and if the consumer who agreed to this form of payment doesn't have the money to pay a given bill, the bank may charge an overdraft fee to the account.