The South African debit order landscape has undergone significant transformations to enhance security and efficiency. Central to this evolution was the introduction of the DebiCheck debit order system. The South African Reserve Bank (SARB) dictated the implementation of a new payment stream in the early morning processing window where authentication by the payer occurs prior to presentment against the bank account. This required the industry to find authentication solutions suitable for the Non-Authenticated Early Debit Order (NAEDO) non-face-to-face industries, with authentication being possible using USSD as the minimum standard for all banks.
As a temporary measure, while the new payment stream stabilised and payers were educated about contact ability and authentication, the SARB allowed non-authenticated payment instructions (where no response was received during the USSD interaction) to be processed in the Second Priority Early Morning Processing Window – these payment instructions formed what is known as the Registered Mandate Service (RMS). This gave stakeholders time to adapt and develop better authentication mechanisms. The SARB emphasised that some user communities might need to amend their business models to stay within the early morning processing window or move to later in the day, which was understood to mean the EFT payment stream.
Parallel to the implementation of DebiCheck, the Modernisation of Payments Project was announced. EFT was deemed outdated – lacking ISO formats, having limited data fields, and being without a mandate register. The industry was tasked with finding solutions that aligned with modernisation efforts and compliance with FATIF and grey listing requirements.
The Role of RMS in the Early Morning Processing Window
RMS was introduced to allow creditors to process deductions even when authentication could not be obtained using TT1 Real-Time, TT1 Delayed or TT2 authentication Transaction Types. Under RMS, if a consumer fails to respond to an authentication request, the mandate can still be registered with the paying bank, albeit with the condition that any subsequent collections will be open for reversal by the payer raising a dispute with the paying bank. RMS collections are presented during the Second Priority Early Morning Processing Window, immediately after authenticated DebiCheck mandates. This compromise has been in place for the past four years, but it was never intended to be a permanent allowance.
Characteristics of RMS:
Disputability: RMS debit order collections are fully reversible by the payer, allowing the payers to raise disputes of successfully collected funds which in most instances results in a reversal being processed by their bank.
Credit Tracking: RMS supports both full and limited credit tracking:
Full Credit Tracking: If the Debtor Bank offers full credit tracking, failed payment instructions due to insufficient funds where the business specified that tracking must be used for a defined number of days will be processed as soon as the account is credited with sufficient funds, or the end of the tracking cycle is reached.
Limited Credit Tracking: For Debtor Banks offering limited credit tracking, failed payment instructions will be presented again during each tracking day, on a best-effort basis and bank dependent. In this context, best effort means that collections are attempted at specific, predefined processing times rather than continuously monitoring the account for incoming credits.
Companies have become highly dependent on RMS, relying on its ability to process transactions in the early morning, which is crucial for maintaining high success rates.
Transition from RMS to RM
Despite initial slow progress, the SARB enforced the removal of RMS from the early morning processing window to later in the day. As part of the modernisation, PASA announced a significant shift with the transition from RMS to the new Registered Mandate (RM) payment stream.
RM Overview
The transition to RM means that RMS collections, previously presented against the payer’s
account in the Second Priority Early Morning Processing Window, will now move to the
evening presentment window. RM collections, once removed from Early Morning Processing, will be
randomised and collected before EFT debits.
Characteristics of RM:
Credit Tracking: RM collections support both limited and full credit tracking, but tracking will only be performed on a bank’s processing day from 12:00 noon up until midnight, which is less effective compared to DebiCheck’s tracking.
No Authentication Requirement: RM does not require a failed mandate authentication attempt before being submitted to the paying bank for registration in the mandate register.
Evening Collection: RM transactions are collected in the evening, before EFT debits.
Same-Day Service: RM collections can be submitted on the action date, providing a same-day service.
Juristic and Dual Signatory Accounts: RM mandates can be registered against juristic and dual signatory accounts, meaning business account that were previously excluded from DebiCheck can now accommodate RM collections.
Authentication to DebiCheck: If the paying bank is also a DebiCheck participant, an existing RM mandate that is successfully authenticated can be presented as a DebiCheck collection (excludes Juristic and Dual Signatory Accounts).
Amendments without authentication: An amendment to a DebiCheck mandate where re-authentication is required, can be made without re-authentication, but all future collections must then be done in the RM payment stream.
By 10 March 2025, all RMS mandates will automatically be converted to RM mandates, requiring no further action from users. All future collections on these mandates would then need to be submitted in the RM payment stream.
Scope of the Impact
Adding context to this shift, over a six-month average, there were 768,702 attempts at DebiCheck mandate authentication that ended up as RMS, comprising 15% of all DebiCheck mandates, which include RMS. On average, 16.7 million collections per month were presented in DebiCheck, including RMS, with a 77% success rate for DebiCheck collections. Amplifin, a bespoke payment and collections solution provider in South Africa since 1995, has observed a 16% difference in success rates between authenticated collections and RMS when examining our internal figures. When RMS becomes RM, the difference is expected to be substantially more due to the later time of processing.
Commenting on the shift in payment system structure, Steven Maier, Chief Brand Officer at Amplifin, highlighted that numerous businesses who have a high RMS collections dependency will be affected and specifically Debt Recovery Agents (debt collectors) will be significantly impacted by this transition, largely due to the nature of the debt they attempt to collect via debit order. “Most debt collectors have substantial RMS portfolios, often comprising 50-80% of their collections. In light of the upcoming changes, it is imperative for businesses to enhance their methods of authenticating payments and managing debit orders. By improving their authentication processes and debit order management over the next year, they can mitigate risk and enhance their collection capabilities. This is crucial as later collections and limited tracking will hinder their efficiency and effectiveness in managing payments,” Maier stated.
Preparing for the Future
As the payments landscape evolves, it is essential for Creditors to stay informed and proactive. Embracing these changes and implementing effective strategies will be crucial for continued success. By understanding the transition from RMS to RM and its implications, Creditors can minimise disruptions to their collection processes. This involves educating consumers about the importance of keeping their contact details updated, ensuring robust authentication methods are in place, and leveraging the new RM system’s features to their advantage.
Amplifin’s Chief Innovation Officer, Freddie Prinsloo, observes that the transition also presents a valuable opportunity for DebiCheck users to enhance their strategies, especially in the Business to Business (B2B) environment. “The RM system’s expanded set of participating banks and inclusion of juristic accounts and accounts requiring multiple signatories will significantly benefit B2B users. By leveraging RM, these users will be able to streamline their collection processes and take full advantage of immediate collection responses and credit tracking capabilities. With RM being seen as the modernisation of EFT, RM addresses the shortcomings of EFT, which presumes payment with delayed collection responses and lacking support for credit tracking” Prinsloo noted.
“Many companies are investing in the right systems and solutions so they can approach RM within a more capable framework,” says Corne van Rooyen, Product Owner AMP (ALLPS Management Platform) at Amplifin. “Those embracing the change are now seeing a return in increased authentication and collection success rates.”
In conclusion, the evolving payments landscape requires credit providers, debt recovery agents, debt collectors and DebiCheck users in general to be adaptable and forward-thinking.
“This shift from RMS to RM represents a fundamental change for companies and consumers, but it is also an opportunity to invest in improved payment systems and structures, revisit debt profiles, and so much more,” concludes Maier. “Yes, change can be challenging, but this move is designed to provide more protection, so leaning into the change has the potential to help South Africans reimagine their financial practices. Businesses that understand the risks of RMS becoming RM and put tangible plans in place to address this risk will gain a significant advantage over those who do not plan ahead and will be significantly impacted come 10 March 2025.”