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Direct Debit - One of the most important payment instruments
The definition of direct debit, also known as bank collection, can be formulated as follows: It is a cashless payment instrument where the payer issues a mandate to the payee, allowing the payee to collect payments directly from the payer's account. Direct debits are also frequently used for online shopping.
Bank collection is suitable as a payment method for subscriptions and installment payments.
One advantage is that the merchant can choose the timing of the debit with direct debit.
The Payment Service Provider should handle the management of SEPA direct debit mandates and the verification of the specified bank account.
ADVANTAGES OF DIRECT DEBITS
Direct debit payments offer various advantages for both merchants and customers. These include the relatively low fees associated with bank collection payments.
The money is credited to the merchant's account without delay. This accelerates both the order processing and the shipping of goods.
Another major advantage of direct debit payments is their suitability for subscriptions and installment payments. For the buyer, the payment process is very convenient – they only need to submit a SEPA direct debit mandate once, and subsequent payments are automatically debited from the account.
The customer no longer needs to remember each payment, and it also provides security for the merchant.
PSP for direct debit - What to consider?
If you decide to offer bank collection as a payment option in your online shop, it is essential to find the right Payment Service Provider. Services such as managing SEPA direct debit mandates or offering installment and subscription payments are advantageous. These are the payments for which bank collection is best suited.
It is also crucial to choose a PSP that verifies the specified bank account. This ensures that the payment is processed correctly.
DISADVANTAGES OF DIRECT DEBITS
However, bank collection as a payment method also has some drawbacks. One significant issue is the high effort required for obtaining explicit customer consent. It is not sufficient to offer a checkbox or similar options.
A SEPA direct debit mandate is the only permissible consent form. Especially for direct debit payments, it is crucial to be cautious when selecting a Payment Service Provider, as many PSPs do not fully comply with legal requirements and operate in a gray area.
Another challenge for merchants is that customers can dispute a direct debit without reason.
Additionally, if the customer's account lacks sufficient funds, the direct debit will not be processed. This results in a relatively high rejection rate for direct debit payments.
Get advice and find the right Payment Service Provider
Are you unsure whether direct debit is an essential payment method for your online shop? Are you looking for a suitable Payment Service Provider for your e-commerce? Or do you have general questions about payment topics? Our experts at Paylobby are here to help and advise you on all matters related to payments in e-commerce. We will work with you to find the optimal Payment Service Provider for your online shop and be your partner for payment transactions in e-commerce.
We will help you find solutions that are ideally suited for your online business and also scalable. Do not hesitate to contact us and get advice from our experts on the best PSP for your e-commerce!
Direct debit - One of the most important payment instruments
In Germany, direct debit remains an important payment method in online trade. Based on transaction volume, it is the second most important cashless payment instrument after bank transfer, with 18.6%. In terms of transaction count, direct debit ranks first with 49.8%. Besides the SEPA core direct debit, which is similar to the former German direct debit authorization for private customers, there is also the SEPA business-to-business direct debit. Additionally, there are three types of SEPA mandates. Besides the paper-based mandate with the payer's handwritten signature, there is also the EPC e-mandate, which is a voluntary service offered by banks and not available from the German banking industry. The last type is the electronic mandate with a secure signature.
The SEPA direct debit process can be conducted in all SEPA member states. These include the 28 EU member states, as well as Switzerland, Monaco, San Marino, Iceland, Liechtenstein, and Norway, the other three members of the European Economic Area. The British Channel Islands of Jersey and Guernsey, the Isle of Man, and the Faroe Islands and Greenland, which belong to Denmark, are not part of SEPA. The same applies to Kosovo, Montenegro, and Andorra, although these countries use the euro as their national currency.
