Pre-Authorized Debit

PAD is a term commonly used in the Canadian payments landscape, and other terms used for this concept include direct debit, pre-authorized withdrawals, and pre-authorized payments.

Pre-authorized debit (PAD) is a convenient, automated payment method that allows businesses and individuals to collect payments directly from a bank account. This system streamlines the payment process, ensuring that bills and subscriptions are paid on time without manual intervention.

PAD is a term commonly used in the Canadian payments landscape, and other terms used for this concept include direct debit, pre-authorized withdrawals, and pre-authorized payments.

How Does PAD Work?

With a PAD arrangement, you give your bank or service provider permission to deduct a specified amount from your account, usually on a recurring basis.

This could be for utility bills, loan repayments, insurance premiums, or subscription services. Once the agreement is in place, payments are executed automatically on the agreed-upon dates, reducing the risk of late or missed payments.

Paper PADs

Up until recently, PAD agreements have only been in the form of a physical paper agreement or contract that outlines the terms of the payment collections.

These paper PADs would contain the bank account information of the person sending the money, and would usually have to be signed in order to be authorized. Businesses would then send the paper PADs by mail or fax to the bank for them to initiate the collection schedule.

Digital PADs

Thanks to the advent of the internet and modern technology, paper PADs have been replaced by digital versions, which amount to the exact same thing but in a digital format. These electronic PAD agreements are faster, more accurate, and require less human intervention and manual administrative work.

VoPay offers a complete digital PAD solution as part of our eLinx^™ payment link product. This allows VoPay users to collect PAD authorization from customers, connect their bank accounts to the platform, and set up payment schedules - all in a single workflow.

Pre-Authorized Debit Benefits

• Convenience - PADs are very convenient both for the sender and receiver. Once set, the payment will be collected and transferred automatically, so there is no need to remember payment due dates.
• Time-Saving - Eliminates the need to manually process payments, saving time for both individuals and businesses.
• Improved Cash Flow - Regular, predictable outgoings help in budgeting and managing finances effectively.
• Reduced Administrative Work - For businesses, PAD can lower the administrative burden associated with invoicing and payment collection.