31 July 2014

Payment and Identification

Antti Larvala - CAL360 Degrees

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Payments strategies 2015-2020-2030

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Direct debit as online payment option

10 February 2011  |  5616 views  |  5

Last week or so, my client asked if they could use direct debit as optional payment method. To me this is really valid point. They said that when offering their service from iTunes, they pay hefty 30 % commission for Apple. When offering service to be paid with credit card, commission is nearly 2,5 % to 4,5 % per paid service. When discussing with direct debit option, they were really keen on it. 

They know their customers, they offer continuous service, where customer pays every month for subscription. There are recurring credit card options, but too many their younger generation customers have credit cards. 

We have been talking and making some plans how direct debit could be really useful when ordering online. 

Now I would like to know few things? First, how high are direct debit fees in your bank for merchant? And secondly; have you seen really international online store offering direct debit as payment option.

 

TagsOnline bankingPayments

Comments: (7)

Frank Nolden - PowertoPay BV - IJsselstein | 11 February, 2011, 07:53

In The Netherlands there are some shops that do DD as a payment method. It is however not a smart possibility, because there is no real proof that the buyer has "signed" the page when purchasing his goods. What happens on the webpage is that the buyer checks a box and allows the merchant to debit his/her account. This is without a real mandate and thus is not a real DD. I have heard rumour that this might be replace by eMandates, but that is still a long way from here.

International DD I have not seen (yet) in an online shop. I do think this is interesting for shops, because DD costs are roughly between EUR 0.05 - 0.08 per txn in NL and B.

Antti Larvala - CAL360 Degrees - Brussels | 11 February, 2011, 08:01

That is true. I have seen similar things in Finland. There are few online forms which customer fills out and sends to merchant.

The difference what we are thinking is to verify this form using third party official authentication method. This way customer signs DD as payment method using his official e-id method and gets receipt to his e-mail while merchant gets "Power of Attorney" letter to debit customers account. Online forms can same time create xml-forms for payment to be send to bank.

If there will be fraud, both parties have their copies.

 

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 11 February, 2011, 12:10

Amazon DE seems to support Direct Debit payments. 

Bezahlung per Bankeinzug >>> Payment by direct debit

http://www.amazon.de/gp/help/customer/display.html?nodeId=504928.

Frank Nolden - PowertoPay BV - IJsselstein | 11 February, 2011, 13:27

I have seen the German DD possibility at amazon. I think in Germany it is also possible to use DD like this and get the mandate from the customer over a webpage. 

Like I said previously this is currently also possible in The Netherlands (however, only roughly 6 of the 30 largest webshops are using DD as payment method - status of November 2010), but this is in fact not legally binding. If there is a dispute, the customer is always right. Also it is a possibility for fraud by entering someone else's account number when purchasing something. 

If you want to implement the paper-alike DD solution, you should remember that this might not very customer friendly. Will the customer stop the buy-action because he/she needs to fill in a number of (digital) forms, etc? I know Finland is quite far with eID, which makes it easier. However, I as a consumer/customer am not very interested in filling in electronic forms when buing something unless it is fast and easy.

Antti Larvala - CAL360 Degrees - Brussels | 11 February, 2011, 18:47

Really good points. In Finland eID and e-invoice are really valid, but there is no solution yet for e-purchases. What we have been thinking is a solution where DD or even e-invoice should be payment method when customer orders something which he has to pay every month, like gym card or movie-music store. Recurring credit card payment is option, but when merchant is considering 0,02 € or 0,10 € payment versus 2,5 % fees of 10 to 20 € purchases, he is leaning to DD or e-invoice. 

We offer for merchant one easy to fill out web form with added verified eID solution, where we check that end user is the person he claims to be and bank checks that same person has rights for account he has enrolled.

 

Frank Nolden - PowertoPay BV - IJsselstein | 13 February, 2011, 12:13

I agree that when you want to let the customer pay recursively (gym, subscription, etc) it is way smarter to use DD than credit card. For recurring DD payments you only have to fill in the form once and that's all. Your approach also has all the evidence in it in case of dispute.

If you want to use it for DD where the amount changes often, it might be more difficult because you will have to inform the customer beforehand of the debiting. There are some timelines you need to adhere to informing customers when debiting their account. 

Joel Constantineau - Semaphore - Montreal | 14 February, 2011, 16:38

There is a proposition in Canada for their local online DD payment platform (Interac) since 2005. The solution is branded "Interac Online" (ref.: www.interac.ca). The cost for the merchant varies between something like 0.35$ to maybe 1$ per transaction.

This can only be used by Canadian banks debit cardholders, and merchants that have an account in a Canadian bank.

There adoption seems to be slow, but the volumes more than double each year. While most of the merchants are interested by this method of payment, the governments shows more interests.

But interoperability of DD is the challenge to go international. Maybe interconnections with existing international solutions could help to resolve the problem, like Paypal, Google, etc.

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name

Antti Larvala

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CEO

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CAL360 Degrees

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2011

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Brussels

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