Direct debit

What direct debit means

Direct debit is a payment method where the retailer collects the amount from the customer's account. Unlike a bank transfer, the action does not come from the customer but from the retailer. To make that permissible, a mandate is needed, meaning the customer's permission to collect the amount, plus the retailer's creditor identifier.

For the customer the method is convenient: no card data, no redirect to a bank, one step in the checkout. For the retailer it means collecting money that is not there yet, and having to repay the amount when it is recalled.

How the process runs

The customer grants the mandate by stating the account details. The retailer files the collection with their bank and the amount is debited within a few days. The customer may object within eight weeks without giving a reason, and longer in the case of an unauthorised collection.

The difference between an objection and insufficient funds matters. In an objection the customer revokes permission; with insufficient funds the debit fails technically. Both come back and cost a handling fee.

When the method is worth it

• Regular customers: anyone who has bought several times and paid reliably is a low risk and uses the method gladly.
• Recurring amounts: with subscriptions and reorders the collection saves every manual step.
• German speaking market: compared with the credit card the method is more widespread here than in many other countries.
• Small baskets: where the card fee eats the contribution margin, the collection is cheaper.

How the risk is lowered

The most effective lever is restricting it to customers with a history. Offering the method only after two paid orders lowers the default rate considerably. The second lever is collecting only after dispatch: anyone collecting once the goods are on their way keeps the option of stopping the delivery in case of default.

The third lever is outsourcing. Payment providers offer the collection with protection, check the customer and carry the default for a fee. For shops without experience that is the simpler route. The fourth lever is bookkeeping: a recurring reminder process with clear stages and a deadline works better than personal chasing.

What belongs legally

The mandate has to be provable, with the date and the customer's details. It applies until revoked, and a revocation must be possible in text form. Account details are personal data and need a legal basis, a defined purpose and a deletion rule. Anyone handling the collection through a provider needs a data processing agreement for it.

Frequent questions

• Is it cheaper than the card? Usually yes, because the fees sit lower.
• Can I repeat the collection after an objection? No, the mandate has lapsed with it.
• When should I not offer it? With high baskets and no customer history.