A direct debit is a transaction whereby funds are withdrawn from the customer's bank account. When a shopper selects the direct debit payment option upon checkout, the merchant is allowed to charge the purchase amount and collect it from the shopper's bank account.
Formally, the person who directly draws the funds (=the payee) instructs his or her bank to collect (i.e., debit) an amount directly from another's (=the payer's). Before the consumer's bank will allow the transaction to take place, the consumer must have advised the bank that he or she has authorised the merchant to directly draw the funds. Direct debit transactions are usually processed electronically and typically used for recurring payments.
Direct debits are available in a number of countries, including the United Kingdom, Brazil, Germany, Spain, South Africa, Switzerland, and the Netherlands. Direct debits are made under each country's rules. In Europe's Single Euro Payment Area (SEPA), the SEPA Direct Debit (SDD) is available in each SEPA country (Eurozone). In the United States, direct debits are processed through the Automated Clearing House network.