Debit Payments
What is a debit order?
A debit order is a transaction where a service provider can collect money from a consumer’s bank account without the consumer having to do anything other than give the service provider approval to do so. Debit orders are widely used to collect monthly premiums on life and investment policies, mortgages and cars payments, medical aid subscriptions, etc. It provides the consumer with a cost-effective and convenient way to make payments.
A “debit pull” (debit payment) transaction occurs when the payer authorises the beneficiary or receiving party to initiate the payment. The beneficiary submits the payment instruction to their bank, which then forwards it to the payer’s bank. Upon receiving the instruction, the payer’s bank processes the request and transfers the funds back to the beneficiary’s bank. In this process, the payment instruction flows in the opposite direction to the actual movement of funds.
South Africa’s debit order system enables authorised collections from a debit order payer’s bank account, based on an agreement (mandate) with a service provider. The system has evolved significantly as part of the broader Payments Modernisation Programme, with a focus on enhancing security, transparency, and trust. There are three main types of debit orders in South Africa: DebiCheck, Registered Mandate (RM), and Electronic Funds Transfer (EFT).
- For payers: This upfront confirmation ensures that debit orders align with the agreed terms and provides explicit authorisation, thereby reducing the risk of unauthorised deductions.
- For businesses/service providers: DebiCheck provides assurance that the payer has acknowledged and authorised the mandate, lowering dispute levels and strengthening trust.
- Mandate registration: Service providers register the mandate with the payer’s bank, including key details such as the contract reference and contact details.
- Processing: RM transactions are processed in the evening window before EFT, and support credit tracking for up to 10 days to improve successful collection rates.
- No real-time authorisation: Unlike DebiCheck, RM mandates do not require the payer to authorise in real time. Instead, the bank notifies the payer once a mandate is registered.
- Disputes & control: Payers have the right to dispute RM debit orders, request reversals, or suspend mandates if they believe a debit is unauthorised or incorrect, provided this is done within the stipulated timeframes. This framework strikes a balance between operational efficiency for service providers and meaningful control for payers.
- Mandates: EFT debit orders are based on a written, voice, or electronic mandate between the payer and the service provider. Unlike DebiCheck and RM, these mandates are not registered with the bank.
- Processing: EFT debit orders are processed in the late evening window, after RM debit orders. They do not have credit tracking functionality.
- Flexibility: EFT collections can be structured as one-off or recurring transactions, making them versatile across industries.
- Risks: Because EFT mandates are not verified or registered with banks, they are more prone to disputes and unauthorised debits compared to DebiCheck and RM. Payers can dispute EFT debit orders within the specified timeframes, and banks are obliged to reverse these transactions with no questions asked, without determining their validity.
