Debit payments basics
ACPAS provides the most advanced payment solutions that are simple to use, fully scalable, and completely secure. Our products allow you to easily collect debit payments like membership fees or rent by using NAEDO transactions and other payment solutions.
We support AEDO transactions, enabling your company to accept and schedule card payments. And with NAEDO transactions, your company can process large volumes of debit transactions in batches and in real-time.
But let’s take a closer look at some of the different types of debit payments.
EFT debit orders
EFT debit orders are a type of payment instruction directed by a third party to the account of a bank's paying customer in accordance with the authority or mandate granted to such third party by the paying customer. In simpler terms, it is a service that allows someone to withdraw money from your account without you needing to do anything other than give that person written, electronic, or recorded voice authorisation to do so. Debit orders are commonly used to collect monthly premiums on mortgage and hire purchase payments, life and investment policies, medical aid subscriptions, magazine and television subscriptions, and other similar fees. It offers the payer a cost-effective and convenient method of making payments.
The collector/beneficiary of the debit order, referred to by banks as a "User," must obtain authorisation from the customer to collect funds from the customer's account via a signed, electronic, or voice-recorded debit order mandate. The customer's mandate typically authorises collections on a specific date, repeatedly, or on a fixed date every month, for a specific amount or a variable amount with an upper limit, such as increased by 10% annually. A User is a party who's been approved by the participating/sponsoring bank and is enabled by this bank in the EFT payment system to collect funds mandated by paying bank customers.
Paying banks process EFT debit order instructions against the customer's account, which instructions include the User's collection information/reference. The information appears on the customer's bank statement, allowing him or her to determine the source of the debit.
EDO, like AEDO and NAEDO transactions
Several participants in the payments collection industry expressed a desire for a comprehensive payment solution that provides the relevant payment functionality to both bank and non-bank beneficiaries to facilitate debit order collection. Some of the challenges that gave rise to the foregoing are as follows:
Failure to collect – some customers withdraw cash from their accounts as soon as it becomes available, assuming their debit order obligations have already been deducted. This results in failed collections and unpaid transactions.
Illegal practices – to protect their capital, some lenders pursued various avenues to overcome the aforementioned. Preferential payment collection systems, card and PIN storage, and sort-at-source arrangements were among them. However, due to varying risk profiles, access to preferential payment mechanisms was not available to all lenders, resulting in certain classes of beneficiaries always having access to accountholder funds before others.
A collections steering committee was formed under the auspices of the South African Reserve Bank (SARB). The goal was to create a mutually acceptable payment solution for debit collection by both banks and non-banks to create a level playing field.
The NPS Act was amended on May 26, 2006, to allow for the collection of EDO payments when the SARB Directive No. 2 of 2006 was published, allowing for the phase-out of existing preferential practices by banks in which specific debit orders were given preference when processed. The SARB directive specifically stated that EDO should be processed after "bulk credits" (such as salaries) had been posted to the account.
The NPS Act was amended on May 26, 2006, to allow for the collection of EDO payments when the SARB Directive No. 2 of 2006 was published, allowing for the phase-out of existing preferential practices by banks in which specific debit orders were given preference when processed. The SARB directive specifically stated that EDO should be processed after "bulk credits" (such as salaries) had been posted to the account.
To reduce return debits, both AEDO and NAEDO transactions are processed as closely as possible, with salary and wage credits to bank accounts. This prevents unnecessary fees, inconvenience and defaults on commitments.
AEDO and NAEDO debits with a capped item limit of R15 000 per transaction are processed at random, giving every User, including the customer's own bank, an equal and fair opportunity to recover payments due from the account. In addition, the solution increases access to the national payment system (NPS) for more consumers and service providers, improves the effectiveness of debit order payments, and reduces the occurrence of returned debit orders and the associated fees and costs.
Users can improve their chances of collecting by using a "tracking service" provided by the paying bank. A NAEDO or AEDO payment instruction enhanced by a tracking service indicates that the instruction can be processed beginning on the mandated date and continuing for a specified tracking period. The instruction is then stored in the background and is activated whenever a credit is applied to the account.
Authenticated Early Debit Order (AEDO) transactions
Using their debit card and PIN, the account holder can mandate the contracted future dated early debit orders with an authenticated early debit order (AEDO).
By swiping their cards and entering their PINs at the point of sale, consumers can electronically authorise future-dated deductions from their bank accounts for the payment of insurance premiums, loan repayments, and asset purchases, among other things. Moreover, because these bank deductions are authenticated in person by the consumer using an electronic signature, the consumer can't dispute them once paid, providing both the service provider and the consumer with a certainty of payment. Currently, authentication can only occur at a physical terminal, making telephone or internet mandates impossible.
Non-Authenticated Early Debit Order (NAEDO) transactions
A non-authenticated early debit order (NAEDO) transaction provides the equivalent benefit of an AEDO to qualifying service providers and consumers transacting with these service providers but without the PIN authentication requirement. In this regard, a NAEDO transaction is like a debit order, but it is processed much sooner, as specified in SARB Directive 2 of 2006.
What exactly is credit tracking?
Credit tracking entails the bank monitoring an EDO-enabled cheque or savings account for any credits entering that account and, as a result of the credit, triggering an EDO, i.e., AEDO or NAEDO transaction designated for credit tracking. This usually takes effect after the initial payment instruction fails on the contracted due date because of late salary payment, public holidays, systems problems, etc. Participating banks provide credit tracking periods ranging from a few days to 32 days.
Do all banks support AEDO and NAEDO transactions?
No. However, from a consumer or paying bank standpoint, almost all banks support NAEDO transactions, and nearly all banks also support AEDO. Therefore, users or beneficiaries who want to use AEDO or NAEDO services should contact their bank to find out if these services are available.
Do all lenders agree with AEDO and NAEDO transactions?
No. Therefore, it’s best to request this information before finalising a loan.
Why choose ACPAS?
ACPAS has created a complete, fully automated payment processing solution. We offer agile and robust software that covers the entire finance cycle of any business that provides credit, products, or services on terms. Furthermore, we strive to combine and automate numerous complex standalone processes so that you can focus on your clients and grow your business.
We have extensive knowledge of the financial services industry and unique insights into loan and credit cycles. This has influenced our offering and how we prioritise assisting your business's success and caring for your clients in the same way you would. You don't have to deal with out-of-date loan and payment applications when using our specialised, all-inclusive software packages. Our solutions have been designed to allow you to view, manage, and control your business from any location and at any time, with notifications alerting you to any changes, complete control over what happens in your business, and the ability to process payments quickly. Furthermore, we take pride in giving our clients a positive customer service experience. We believe that by visiting ACPAS, you will develop long-term relationships with a team always willing to go above and beyond for you.
Contact ACPAS for details
Contact us today for more information about NAEDO transactions and how we can streamline your business. Alternatively, please browse our products and services to find the solution you need.
