In an effort to modernise the payment system, the South African Reserve Bank (SARB) has announced that it will implement AC/DebiCheck payment system from 1 May.
SARB said the aim of the project was to address the increasing levels of abuse in the debit order payment system known commercially as the early debit order (EDO) payment system.
SARB said: “From May 1, 2021, all new and renegotiated EDO mandates will be originated in the AC/DebiCheck payment system and not in the current EDO payment system.
“Early debit orders will only be processed through the AC/DebiCheck payment system, while normal debit orders will still be processed later in the day as per current arrangements.”
The central bank said the EDO system allowed consumers to instruct a company or user to collect money from their bank account.
SARB said the new AC/DebiCheck payment system consumers would provide authorisation to their bank to release funds from their accounts when a debit order was submitted by a company or user with whom they conducted business.
The AC/DebiCheck payment system was first implemented on August 1, 2018, and has been going through various stages and processes of testing and integration.
“Companies or users of the EDO system had until November 1, 2019, to fully implement the AC/DebiCheck payment system. Since the implementation date, companies or users have been requested to begin using the system for all EDO collections,” it said.
“Owing to the complex nature of the AC/DebiCheck system, a lengthy ramp-up period was required to ensure that all stakeholders in the EDO collections ecosystem had implemented and tested their internal processes and interfaces to the AC/DebiCheck payment system,” the SARB said.
SARB added that the AC/DebiCheck project was an initiative of the collections industry that ensured the safety and efficiency of the national payment system, and the mitigation of rogue and fraudulent behaviour in the collections system.
By Carin Smith for Fin24
Debit order disputes have increased significantly over the last three years, according to the Payments Association of South Africa (PASA).
Yet, it said recent investigations have shown that in the majority of cases, proof that debit orders were indeed authorised by consumers could be provided.
According to PASA, the increase in debit order disputes could mean that companies have bad practices in obtaining such debit order mandates, or that consumers are asking their banks to reverse actual valid debit orders.
Consumers could be doing this, because the reversal of such legitimate debit orders creates temporary cash flow relief for them. PASA emphasises however, that this kind of behaviour by consumers is not acceptable and has become a huge concern for the financial services industry.
As part of a project to reduce debit order disputes, banks are investigating ways to enhance their current dispute and prosecution processes.
Over the last few years PASA has been working with banks to address debit order abuse. Initiatives include – statistically identifying potential problematic companies, refining the minimum criteria for mandates, and managing a debit order abuse list which can result in “rogue companies” being excluded from the system.
Initiatives also include a process to investigate and issue fines or initiating forensic investigations and prosecution when companies do not have mandates or have mandates that do not conform to minimum requirements.
One of the most pertinent, but longer-term solutions to curb debit order abuse remains the Authenticated Collections project that was started in 2013.
Now close to implementation, the project will deliver a new type of debit order, called DebiCheck. Currently there are 11 banks participating in DebiCheck. Through this new debit order system, a debit order will only be processed to a consumer’s account if the mandate for such a debit order has been electronically confirmed by the consumer.
This means that consumers will be aware of which DebiCheck debit orders will be processed to their accounts – and these debit orders will not be processed by the bank if they are outside the agreed conditions the consumer initially confirmed.
As a result, PASA foresees that the number of invalid debit orders being processed as well as the number of consumer disputes where valid mandates are in place will rapidly decline.
Improving safety and efficiency
Additionally, an interbank committee has been established and mandated to improve the safety and efficiency of debit orders. This is through including new ways to better identify existing users abusing the system, enhanced measures and support to ensure offenders are adequately investigated and prosecuted, and processes that will assist in curtailing improper consumer behaviour.
PASA says consumers continue to have the right to dispute or instruct their bank to reverse debit orders they have not agreed to, or which are processed outside the mandate they have given.
They should continue to be watchful when entering into contracts – verbally, in writing or electronically. PASA also encourages consumers to check their bank statements on a regular basis. Also, not to provide or confirm account information if they are not certain what exactly it will be used for.
The industry is currently involved in the prosecution of certain rogue collectors. PASA believes the new measures it is working on will significantly assist the authorities and improve the success of prosecution.