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July 7th 2020

Electronic Direct Debit without any risk

3 min read

Electronic direct debit procedure without any risk and uncomplicated with Nexi.

Payment defaults with the electronic direct debit procedure are associated with elaborate debt collection procedures, which cost us a lot of time and nerves. As a merchant, how can I reduce this effort?

Adam, Shoe Retailer from Neuss

Response from Christian Jung, Director of Risk Management at Nexi

"Please sign here" - whether in the grocery store, shoe shop, or jeweler, paying with a debit card and signature is indispensable in retail. The Electronic Direct Debit Procedure (ELV) makes it possible and is fast and uncomplicated for both merchants and consumers. Unlike the Electronic Cash procedure (EC), where the consumer's account coverage is directly verified through a PIN entry, the merchant does not receive payment guarantee with ELV. Specifically, this means: if the customer's account is not covered or if the customer initiates a chargeback after the debit, the merchant bears the risk of loss. As a result, if the merchant wants to receive payment, they must initiate a costly debt collection process. Nevertheless, many merchants prefer ELV because it is more cost-effective than the EC procedure. We explain why this is and how the two payment methods work here.

ELV vs. EC: What is the difference?

Procedure

Description

Electronic Cash
- EC -

 In the Electronic Cash (EC) procedure, the cardholder authorizes the debit by entering their PIN. The issuing bank provides payment guarantee for all positively authorized amounts that are submitted for settlement within 7 days - meaning the merchant receives the outstanding amount credited. The merchant pays a corresponding fee (Girocard fee) to the issuing bank for the payment guarantee.

Electronic Direct Debit Procedure
- ELV -

 The Electronic Direct Debit Procedure (ELV) corresponds to a direct debit authorization: By signing on the sales slip, the merchant is given permission to debit the amount. The payer commits to "providing the amount in question" from their checking account. If the account does not have sufficient funds at the time of the debit, the amount will be reversed (returned debit) - the merchant does not receive any funds. There are no fees for ELV debits.

 

CLV+: Direct Debit Procedure with Payment Guarantee

To provide merchants with both payment security and favorable Nexi, Nexi has developed the secured direct debit procedure CLV+. In this process, Nexi assumes the risk management for all payments with debit card and signature, as well as the default risk for returned debits

Nexi evaluates the risk of each card transaction and determines whether a payment confirmation by signature (CLV+) is sufficient or if a PIN entry (Girocard) is necessary. Through the optimized selection of procedures, the default risk is significantly reduced. Should there still be a payment default due to a chargeback or insufficient funds in a customer's account, Nexi handles the entire processing and settlement of the claim. The merchant does not need to worry about anything and always receives the full amount. CLV+ is thus as convenient and secure as the EC procedure, but considerably more cost-effective.

Maximizing Merchant Benefits: A Comprehensive Overview

  • No Payment Defaults Due to Chargebacks
  • Assumption of Risk and Debt Management by Nexi
  • Cost-effective Alternative to EC Procedure with PIN Entry
  • Fast, Easy, and Customer-Friendly Processing at the Point of Sale
  • No Investment in New Hardware Required
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