Over the last few years there has been a significant increase in debit orders processed to bank accounts without permission (a mandate) from consumers. On the other hand, irresponsible consumer behavior – where bank customers are disputing debit orders that do have valid mandates, at their banks – has also become a huge concern for the industry.
As a result, the South African Reserve Bank (SARB) requested PASA, which includes the South African Banks, to find a solution. An industry project aiming to enhance and eventually replace certain type of debit orders and thereby contributing substantially to the safety and efficiency of debit orders, was started during 2013.
Now close to implementation, the project will deliver a new type of debit order, called 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. As a result, we foresee 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.
For DebiCheck debit orders, consumers will be required to confirm, electronically and on a once-off basis, their debit order information with their bank.
This is significant for a number of reasons, the most important of which is putting consumers in control of their DebiCheck debit orders, by allowing them to firstly verify the debit order information and, secondly electronically confirm this with their bank, therefore helping them to know exactly what will be processed to their bank account.
To support this new electronic confirmation process, banks have developed a number of ways in which they will obtain such confirmation, such as through USSD messaging to cellphones, banking applications and by utilising traditional channels such as on-line banking ATMs or branches.
With DebiCheck, banks will now have an electronic record of the debit order information consumers confirmed and will check such information before they process the debit order to the consumer’s bank account.
This means that DebiCheck debit orders will not be processed by the bank if they are outside the agreed conditions the consumer confirmed initially.
“This project is one of the largest interbank payment projects we have had to date – it is an entire eco-system change, with big complexities and notable infrastructure changes that will affect banks, consumers and users,” says Walter Volker, CEO of the Payments Association of South Africa.
DebiCheck will therefore be implemented in a phased approach, over a period of two years, starting during the latter part of 2017. This means that not all companies participating in DebiCheck will start using DebiCheck immediately but will slowly convert to the new system, helping the National Payment System to stay stable and reliable whilst ensuring adequate time for consumer awareness and education.
For now, DebiCheck will only be used for early debit orders but, in time, it may be used for other debit orders as well.
