DIRECT DEBIT AS A PAYMENT METHOD

Payment by direct debit is a very popular method of payment in online shopping, especially for subscriptions and payments in installments, although it is also very common for customers to use this method even when making one time purchases.

For E-Commerce retailers, offering the direct debit payment method has advantages and disadvantages. Here is a quick overview.

• Bank account as a payment method for subscription and installment payments.
• Advantageous as the retailer can choose when the debit account is charged.
• The payment service provider takes over the administrative part of the payment process and verification.

Advantages of direct debit 

Direct debit payments offer both retailers and customers diverse advantages in payment. One major advantage is the comparably low fees that are charged for payment by direct debit.

The money is removed from the debit account without delay and the retailer receives the payment very quickly. This speeds up the payment processing as well as the dispatchment of the order.

Another noteworthy advantage of direct debit payment is how efficient it is for subscription- and installment-based payments. For the customer, paying is easy and quick, as they must only enter their debit information once, and the payment is automatically taken from their account every month.

The customer does not have to do anything beyond the first month - and the retailer retains a customer through easy and automatic monthly payments.

PSP for direct debit - what should you look out for?

If you’ve decided to offer direct debit as a payment option in your online shop, then it is important that you choose the find payment service provider for that. Services such as acquisition of the SEPA direct debit mandate or offering installment and subscription payments are advantageous. Lastly, it is important that the direct debit process is optimal as a payment method in your online shop.

It is also important to choose a PSP who will verify the provided bank information of the customer. That way, you can be sure that the payment is processed correctly.

Disadvantages of direct debit

There are certain disadvantages of of direct debit as a payment method to consider. Direct debit is an expensive payment method, because the customer must explicitly approve the charged amount that will be removed from their account. It is not enough to offer a checkbox next to the “pay now” button to authorize the payment.

Instead, the SEPA direct debit mandate relies on thorough consent. In the case of direct debit payments through payment service providers, keep a close eye on the payment service provider you choose, because many PSPs do not completely follow strict legal guidelines when it comes to processing the payments - they operate in a grey zone.

A further challenge for retailers is that customers can oppose direct debit payments without giving a reason.

Additionally, when the account of the customer is overdrawn, the payment will not be processed. Therefore, the rate of declined payments is high in direct debit payments in comparison to other payment methods.

Let us help you find the right direct debit payment service provider for you.

Are you unsure if direct debit is an important payment option to offer in your online shop? Are you looking for a suitable payment service provider for your E-Commerce? Do you have any questions related to payment? Our experts at Paylobby are happy to answer any of your questions and advise you during your search for a payment service provider. We will find the optimal PSP for you and your business together and are your partner in payment processing for E-Commerce.

We will help you discover solutions that are perfect for your online shop. Don’t hesitate to contact us - our experts are here to help!

Direct debit - one of the most important instruments of payment

Direct debit is an ever-popular payment method in online shops in Germany. When considering transaction volume, it is the second most popular method of cash-free payment after bank transfers at 18.6%. If you consider the number of transactions, direct debit jumps up to take 49.8% of the transactions - method number one. In addition to SEPA direct debit, which is available to private customers, similar to the early German “direct debit entry authorization” there is also SEPA direct debit available for businesses. There are three types of SEPA mandates. There is the paper-bound mandate that requires a signature of the payer, as well as the EPC e-Mandate that is offered as a voluntary service from certain banks and is not offered through the German credit card business. The last type is the electronic mandate with a secure signature.

The SEPA direct debit mandate can be used as a payment process in any of the participating states. These states include the 28 members of the European Union, as well as Switzerland, Monaco and San Marino, Iceland, Liechtenstein, and Norway. The British Canary Islands Jersey and Guernsey, as well as the Isle of Man, the Faroe Islands and Greenland are not members of SEPA. Although the Euro is used as currency in Kosovo, Montenegro and Andorra, they do not participate in SEPA either.