Payments body fast tracks new system to curb debit order fraud
Johannesburg - The Payments Association of South Africa (PASA) is under pressure to ramp up a new debit order system to meet the South African Reserve Bank’s (SARB's) deadline of February 2019.
The new Authenticated Collection system or DebiCheck requires banking customers to electronically confirm new debit orders before they can be processed. It is currently being piloted among select users, and PASA plans to increase this number from February.
“DebiCheck is a massive project; its [implementation] is not just up to the banks but to all the users, including all the big companies you usually pay debit orders to,” PASA CEO Walter Volker told Fin24.
Dozens of banking clients took to social media during the festive season to complain about unauthorised debit orders of amounts of R99 or R59, figures deemed too small to warrant an SMS notification by banks, which were only picked up when people combed their statements.
However, PASA, which is the payment system management body recognised by the SARB, said it didn’t see a rise in the number of objections relating to unauthorised debit orders over December.
“We receive on average a million debit order disputes every month. A dispute doesn’t necessarily show fraud; up to 90% of disputes are people trying to manage their cash flow,” Volker said.
He added that people who reverse authentic debit orders because they run out of money create problems for PASA in identifying statistical trends relating to fraudulent transactions.
How to reverse a dodgy debit order
Banking clients who dispute a debit order within 40 days of the transaction will receive an immediate reversal under the current system.
If the debit order is older than 40 days, the client should lodge the complaint and the recipient has 30 days to provide the bank with proof that a mandate was obtained. If they are unable to do this, the customer is reimbursed.
Volker advised people to contact their banks directly if they notice fraudulent activity.
The majority of unauthorised debits originate from the Non-Authenticated Early Debit Order (NAEDO) system. It was launched in September 2006 to allow for preferential payments to creditors as soon as possible after a salary has been paid into bank accounts of customers, and runs before the standard EFT debit orders.
Due to the abuse of NAEDO by fraudsters looking for an easy buck, the SARB in 2013 ordered PASA and all banks to move to the DebiCheck system by September 30 2016. This deadline was extended to February 2019, while the system is being piloted and tested.
FNB, which was cited by several social media users who claimed they’d been the target of fraudulent debit orders, said it looks forward to DebiCheck becoming fully operational as this will provide a “needed breakthrough for the industry” in combating fraud.
“FNB customers are notified via SMS every time a new debit order is raised on their accounts for the first time, regardless of [the] amount, and if they believe it to be unauthorised, have the ability to dispute and reverse it by replying to the message or logging onto one of FNB’s digital platforms”, Ryan Prozesky, the CEO of FNB Consumer Core Banking, said in an emailed statement.
Prozesky added that FNB customers now receive InContact notifications for all debit order transactions, regardless of the amount.
Volker admitted it’s difficult to take criminal action against the people behind sham debit orders.
“Many consumers don’t bother to register a criminal case, once their money has been reversed… and it’s difficult to prove criminality.”
If PASA receives frequent complaints about debit order abuse against a particular account, the holder goes under review and if they’re found to be guilty, they are placed on a so-called blacklist which blocks them from the debit order system (NAEDO).
Volker added that most of the users they’ve added to their “blacklist” are call centre operators in the Durban area.
While there were also credit/debit card fraud complaints during the festive season, Volker said it’s almost impossible to clone chip cards, the predominant system used in South Africa.
“We are seeing a rise in e-commerce fraud; people buy on the internet from unsafe merchants and the account number can either be copied and used or sold to international syndicates.”
Volker said that some South African card numbers are bought by fraudsters in the US, as the country still makes use of magnetic strip technology on debit and credit cards.
He advised internet shoppers to only make use of websites which require the Visa and MasterCard Secure Code for payment. This sends an authorisation request to an online customer’s bank before the money can be removed from their account.
Volker advised consumers who have been affected by an e-commerce scheme to contact their bank, which has the duty to recover the funds from the merchant the money was fraudulently paid to. If the merchant however has disappeared, the bank still has the responsibility to return the client’s money.
“In the end, the buck always stops with the bank,” Volker said.
PASA hasn’t had to contend with many complaints of fraud relating to new mobile payment apps such as Snapscan or Zapper, which allow customers to pay for goods and services directly from their smartphones.
The association said the biggest origin of card fraud remains ATMs, where criminals swap people’s cards inside the machine.* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER