DebiCheck: The next chapter
It is hard to believe that EDO has already been discontinued for new uploads for two months on the 1 of July 2021, and that DebiCheck has been flying solo for this time.
We sat down with resident DebiCheck expert, Vaughn Hechter, Head of Customer Services for NuPay and Delter, to get a better understanding of how the market has been responding to DebiCheck, and where there is more room for improvement.
We start our conversation by asking Hechter why he thinks DebiCheck is relevant in the payments industry today: “Unfortunately, debit order abuse is a reality from both consumers (for cash flow management) and rogue business owners (for fraud), especially in the NAEDO and EFT debit platform. DebiCheck significantly reduces these challenges, as consumers must authenticate transactions in order for a business to process transactions to their account. Thus, these transactions can’t be disputed or reversed if they were processed within the confines of the mandate provided.”
Delving further into this fascinating subject, Hechter also explains that a migration platform was established to simplify the process of migrating EDO transactions for business owners. A deadline of 31 October 2021 has been set by when all EDO transactions can and must be migrated to DebiCheck.
When asked how the payments industry is responding in terms of converting EDO transactions by this deadline, he responds: “The uptake in the shorter-term segment is naturally limited as there are no EDO transactions being processed in this segment after this period. In the longer term book, post-October 2021, business owners are currently testing systems but holding off with bulk migrations until some stability questions, between banks, within DebiCheck systems have been ironed out.”
In addition to DebiCheck transactions lessening the opportunity for fraudulent transactions, with consumers now authenticating transactions, it also offers the potential for better collection rates with less transactions being vulnerable to disputes. Asked what his opinion on the subject is, Hechter responds that he believes, in the long-term, this can become a reality. However, he believes this success will depend on the DebiCheck system’s ability to respond to some rules that challenge the systems’ efficiency and ability to improve collection rates. These include:
a) The lack of a date adjustment rule. Typically, when a payday falls on a non-processing day such as a Sunday or public holiday, employers and banks pay salaries on the previous working day. EDO catered for this by allowing the pay system to roll the first debit attempt date back to the previous business day. If the salary was not paid yet and there were insufficient funds, then the transaction simply went into tracking and was collected once the salary was paid. DebiCheck does not currently allow for this, which results in lower collection rates. The concern is that the system will be abused by users requesting the consumer to authenticate the mandate for an earlier date, which they might consent to simply because they are desperate for credit. However, this will drive up the cost of the system and ultimately the consumer will pay for these additional fees.
b) The ability to suspend a mandate and the ease with which it is done through banking apps. This happens even before the first debits have been processed, which again translates to mere cash flow management by consumers, the same as what we saw in NAEDO. It is also one of the reasons that drove the instruction to construct a new Authenticated Collection (AC) system. In DebiCheck the system allows for very simple ways to suspend transactions and the methods are marketed to account-holders by their banks. This increases the likelihood of failures in presenting, thus reducing collection rates.There should be better oversight/investigation as to why the suspension of a mandate is requested with communication to the user requesting the debit, prior to allowing the suspension of a mandate.
c) Disputes being granted and transactions reversed even though all the rules were followed. Although the occurrence of this challenge might seem low at present, we are only two months into the DebiCheck only system. Banks are experiencing challenges where disputes are being granted and funds are reversed even though transactions were processed within the rules of the system. Issues in bank systems play the largest role here and would need to be rectified.
“If these challenges can be addressed and a workable solution found for each, DebiCheck will surpass the success of the previous NAEDO system, and might match the success that AEDO offered for sixteen years.” he adds.
After two months of DebiCheck officially being in use, some service providers are more successful in processing DebiCheck transactions than others. Asking his opinion on the reason behind this, Hechter elaborates: “DebiCheck is essentially Authenticated Collections, also referred to as AC. There are very few businesses that have always specialised in authenticated transactions for business owners and consumers. Normal debit and credit card point-of-sale transactions may be regarded as part of this service offering, and indeed it is; however, when you pair the authentication of a transaction with a future debit date, this is where the concept gets tricky.
"At NuPay, we saw the need for such a product solution and introduced NuPay Classic in 1998. This opened the door for processing future-dated authenticated transactions, which we have been actively pursuing ever since. I can’t speak for other service providers, but the knowledge we have gained in this field since 1998 has assisted us in creating a solution, that works, with relative ease.”
Adopting and embracing a new system can sometimes be met with some resistance due to uncertainty and even fear. We asked Hechter how he has experienced this transition: “Our customer base is currently in the storming phase (to use Tuckman’s model) and making sense of the vast number of intricacies within the DebiCheck system. The initial trepidations of a new system that seemed daunting are in the past, and the emphasis has moved to achieving stability at the banks within the new system. Ultimately, we want DebiCheck to move the business owner and their business to a performing phase.”
Assisting customers in embracing the DebiCheck system is clearly an integral part of achieving success. We asked Vaughn how they approached this and how they were able to make the DebiCheck integration seamless: “The primary focus on our side was to get ahead early and have a strong technical solution which is user-friendly. When we created our solutions, we took a two-pronged approach where on the one hand we created a service that proverbially 'looks, tastes and smells' like AEDO, but we do the hard work in the back-end to process a DebiCheck. Transactions are therefore created with defaults and minimal selection criteria.
"In the second offering we provide a comprehensive solution where clients can customise and configure their own parameters and manage their personalised end-to-end solution. A comprehensive integrated solution to our Delfin and Webfin solutions, further assisted our customer base to continue with a business-as-usual approach with minimal impact. There are subtle differences to EDO being discovered in the DebiCheck solutions every day by merchants. The key is to be cognisant of the requirements and to adapt to users’ needs in building solutions that fit their businesses.”
Commenting on the impact of COVID-19 on the implementation of DebiCheck, Hechter feels that service providers that launched remote non-face-to-face solutions for their customer base (where businesses could not open their doors due to restrictions) allowed their employees and customers to get to know the systems before the cut-off date, thus promoting a more positive outlook on the solution.
We end our discussion by asking how he sees the future of DebiCheck over the next five to ten years? “The speed of technological advancement is staggering. For example, the EDO payment system was very successful for more than 15 years, while DebiCheck’s relevancy timeline might be shorter. However, there is ample room for expansion. The original design of Authenticated Collections catered for additional transaction types as well. Some of these are sure to find its way to the market in the next few years once the current offering has stabilised. The system can only get stronger and more efficient, especially when the three key concern areas for successful collections in DebiCheck are addressed,” he concludes.