Debicheck – a new debit order system for South Africa

What is Debicheck and why do we need it?

We need a change in the current debit order systems and there are two main reasons for this much needed change, and for the amount it costs and the amount of work that has been done, there has to be a good reason, and there is.

Debit order fraud………. Many people have had fraudulent debit orders put on their accounts, and part of the problem is that they can’t get the debit orders off if they do find them.

Fraudulent debit orders happen in two ways:

People will phone you and offer you things that are very cheap, so you think well this is worth buying. You will then give them your bank details and delivery address etc. Of course, the cheap cell phone or other goods never arrive, but they have your bank details. Sometimes they will debit your account every month, and other times they sell the info to syndicates somewhere else and they set up debit orders on your account.

We worked with a lady who complained she was having R95 debited from her account every month. This debt order came from a funeral policy place which she had never heard of, and who she never gave permission to. After careful investigation, it became clear that she didn’t really have a funeral policy, just someone taking her money.

Capitec did a survey and found that 35% of people weren’t sure of all the debit orders on their account and that’s exactly what the fraudsters want, someone who isn’t even going to report the fraud because they don’t know about it.

How do debit orders work at the moment and what is going to change?

At the moment, the bank gets an instruction from a debit order company to process a debit order on a clients account, and they are obliged to pay the money. The banks  do not sit with the debit order mandate (the document you signed when you give them permission to debit your account).

Here is how debicheck will work:

Here’s an example: you decide to buy a TV on credit. In the old system, you signed a piece of paper which authorised the shop to deduct R450 per month.  The shop kept the piece of paper in their safe and instructed the bank to debit your account every month for R450, and the bank did.

With Debicheck, there are two changes

First, after you sign the debit order at the shop, they have to send not just an instruction to the bank, but a copy of the debit order.

Then, you have to give the bank permission to let that debit order go through your bank account.  You will receive a SMS or email,  either the same day or the next day, depending on the type, which you have to approve and send back by 9pm, otherwise the debit order will not go through.

What will happen to the debit order if you do not get an SMS or can’t respond by 9pm?

In the pilot phase, the customer authentication mail or SMS has caused problems.  The bank sends the SMS which expires at 9pm and you don’t see it. Or the client doesn’t recognise the SMS and thinks it’s another fraud thing and deletes it.

Because the bank is sitting with the mandate and you have approved it, it will be much harder to send back a debit order unless the amounts or something obvious is wrong, so be aware of that too. You can’t just decide that you need money this month, and  send back all your debit orders.  You have signed and approved, so it’s more difficult.

This system is not being used by all the banks and others yet. At this stage, it does cause problems. The banks and other debit order users are going to have to explain the system very carefully to all their customers to avoid missed debit orders.

What will happen with current debit orders?

From the 1st of November this year, all new debit orders will be Debicheck. There are 36 million debit orders that are processed every month for an amount of R66 billion and about 1 million are disputed every month.

By November 2020, all debit orders have to be converted to Debicheck.

It’s going to be a long process and will affect us all, but it’s a better system.

The moral of the story is, before you give your bank details, ID number and address to someone over the phone, make sure that you know who they are, where their office is, and what they are going to do with the information.