Reserve Bank tightens measures against debit order fraud

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From 1 May all stakeholders making use of early debit orders must process payments through DebiCheck (Getty)
From 1 May all stakeholders making use of early debit orders must process payments through DebiCheck (Getty)
  • The Reserve Bank says all new and renegotiated early debit orders will have to go through the Authenticated Collections/DebiCheck project.
  • The project was first launched in August 2018, partly to mitigate against debit order fraud.
  • Existing systems known as Authenticated Early Debit Order and Non-Authenticated Early Debit Order will be discontinued in the latter part of the year.

From May 2021, all new and renegotiated early debit orders must be processed through the DebiCheck System, says the SA Reserve Bank.

The bank on Wednesday issued a statement on the modernisation of the national payment system. The Authenticated Collections (AC)/DebiCheck project was implemented in August 2018, partly to address abuse of the debit order system and fraudulent behaviour, according to it.

Fin24 previously reported how several consumers were struggling to get banks to reverse unauthorised debit orders from their accounts. Debit orders were often from companies they did not recognise and were as much as R99 per month.

Major banks - Absa, Standard Bank, FNB and Nedbank - at the time had partnered with the Payments Association of South Africa (PASA) to have consumers authorise debit orders through DebiCheck by using their cellphones.

Due to the complex nature of the AC/DebiCheck system, a lengthy ramp-up period was required, said the Reserve Bank. All stakeholders using early debit order collections had to align their internal processes and interfaces with the DebiCheck system. Companies or users of the system had until 1 November 2019 to fully implement the new payment system, it added.

Early debit orders are such that they are collected just after midnight on the payment collection date. A normal debit order or an Electronic Funds Transfer or EFT is collected much later in the day on the payment collection date, the Reserve Bank clarified. The DebiCheck system is used by all retail banks that participate in early debit order collections.

While banks had to have implemented the DebiCheck system by late 2019, they could still opt to use the existing Authenticated Early Debit Order (AEDO) and Non-Authenticated Early Debit Order (NAEDO) systems. Both AEDO and NAEDO would be discontinued in the latter parts of 2021, the Reserve Bank said.

"From 1 May 2021, all new and renegotiated early debit orders must be processed through the DebiCheck system," it added. Normal debit orders would still be processed later in the day, in line with their current arrangements, the bank said.

The PASA and retail banks will be monitoring to make sure companies making use of new early debit orders do not do so outside of the DebiCheck system. 

"Non-compliance of the directive is a criminal offence and companies and banks who do not comply with the directive could be prosecuted and expelled from participating in the national payment system," the Reserve Bank said.

It was difficult to determine what the direct impact of DebiCheck had been in reducing debit order fraud, as it was still in its "infancy stages", the bank added.

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