Debit order fraudsters could be dealt a blow

Cape Town – Debit order fraudsters could be dealt a blow should businesses implement authenticated early debit orders more widely, says an expert.

Keith Wrede, deputy managing director of Atech NuPay, told Fin24 that banks deem authenticated early debit orders (AEDO) as ‘non-disputable’.

Debit order fraud occurs when a consumer agrees to have their account debited but subsequently goes to the bank to dispute the transaction.

Non-authenticated early debit orders are highly susceptible to this kind of fraud.

According to BankServ 4% of non-authenticated early debit orders are fraudulently disputed.

A successful debit order results in the accounting system (debtors book) reflecting a healthy state of affairs, Wrede said.

“This also means that the debtor is a customer in good standing and the business is doing well.”

A disputed debit order results in two problems, according to Wrede.

“Firstly the business has lost the payment due, the money is still owing. Secondly the customer’s payment transaction must be reversed in the accounting system,” he said.

After reversing the transaction in the accounting system however it will reflect that the customer has a payment due in the current month, which is incorrect because the payment was due in a prior month.

“The business could be in trouble and all kinds of remedial actions kick in,” according to Wrede.

Businesses that make use of Authenticated Early Debit Orders (AEDO) will not have any disputed debit orders, says Wrede.

Through AEDO, the debit order is authenticated by way of the debtor swiping or putting their bank card into an EFTPOS device and entering the PIN at the time of concluding the transaction.

Two major obstacles prevent wider use of AEDO’s, according to Wrede.

“Systems and process changes on the business side and the cost of having terminals,” he said.  

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