Debit orders are one of the most effective methods that can be used to get instalment payments secured to a certain degree. Unfortunately debit order abuse in South Africa has become a major issue, with many consumers becoming a victim to debit order scams. Because of the rise in fraudulent activity on debit orders, the South African Reserve Bank and the Payments Association of South Africa, have introduced a new initiative called DebiCheck, to help protect South Africans against fraudulent and incorrect debit order authorisations.
DebiCheck will replace the existing debit order payment streams, including AEDO (Authenticated Early Debit Order) and NAEDO (Non-Authenticated Early Debit Order) and is an industrywide initiative that allows consumers approve all new debit orders once-off electronically to prevent incorrect or unauthorised debit orders from coming off the consumers account. This means that, the debtor’s bank will now know the details of what they have agreed to and will not allow debit orders to be processed outside the terms that the debtor has confirmed with them. Debicheck gives the consumer full control. Debicheck is scheduled to be officially in place by October of 2019, currently most companies and banks are in a pilot phase testing how well this system works. The process of implementing Debicheck to all companies and service providers will be a gradual one, therefore, not all new debit orders will be affected at the same time. There is also a “sunset” date (when the implementation of new AEDO and Naedo payments come to an end) – which is now 31 October 2020. Debichecks will not replace existing debit orders.
Debichecks can be authorised using the following channels (you will note that these channels also accommodate for consumers who may not be technologically inclined):
- Cellphone Banking (USSD capability)
- Online Banking
- In-branch Banking
- Banking Apps
- ATMs
The process of authenticating a DebiCheck debit order consists of 4 steps: (refer to diagram below)
- Identification of the creditor/business by the collecting/sponsoring bank;
- Verification of the payer/debtor/account holder by his/her paying bank; and
- Validation of the payer/debtor/account holder’s account by his/her paying bank and if all is in order then:
- Authorization of the mandate by the payer/debtor/account holder through authentication/confirmation channels.
The diagram below illustrates the process:
The introduction of the system has proved to be a technological challenge for the banks and as a result, the implementation date for the roll out of Debicheck has been pushed back a number of times. However, the SA Reserve Bank has indicated that the implementations dates referred to above are final. A number of creditors are concerned that the new system will be problematic to implement but one hopes that it will achieve a balance between consumer and creditor rights.
By Taysha Reddy (B.Comm)