Debicheck: The ultimate guide

What is DebiCheck?

DebiCheck is a uniquely South African debit collection system introduced to protect consumers and service providers from debit fraud. It’s the first of its kind, requiring consumers to authenticate mandates digitally through their bank, where it can also be tracked and accessed by the bank.

How DebiCheck works – step by step

1. The bank sends a request to the customer to confirm the DebiCheck payment information. This includes payment method, collection date, and collection amount. 
2. The customer can confirm the information is correct or update it before confirming it – by changing the collection dates or payment method, for example.
3. The bank loads the information on a mandate register. A confirmation message is sent to the customer’s credit or service provider
4. When the debit order is processed to the customer’s account, the bank first verifies the debit order information with the information on the DebiCheck register – the collection is only processed if the information matches. 

Can a DebiCheck be reversed? 

A DebiCheck order can not be reversed. However, if you did not authorise a DebiCheck order, you can dispute it. You can also stop future DebiCheck payments on your account, but it does cost a small fee, depending on the bank. 

What is the difference between DebiCheck, debit order and other recurring payment methods?

From subscription-based entertainment services to BNPL, insurance payments, mobile data contracts, education, retail account payments and more, demand for flexible, recurring payments is growing.

Industries such as healthcare, telecommunications and insurance face particular pressure to secure successful debit order collections so they can ensure service continuity and avoid impacting a customer’s quality of life. For customers, staying current on these payments helps avoid penalties or disruptions to essential services. 

Recurring payment methods like debit order and DebiCheck offer convenient ways to ensure consistent user-not-present payments. 

The most popular recurring payment collection methods are: 

Debit order

Debit order systems offer a fast and cost-effective way of collecting regular payments from a customer’s bank account. Debit order collection relies on the business to keep a record of the agreement or mandate between the business and the payer, and involve the payer’s bank only when the collection has been processed. 

However, as this method is not digitally authenticated via the payer’s bank, it can lead to disputes if a customer does not recognise the transaction or chooses to cancel, and it places the onus on the business to evidence the mandate that authorised the collection. 

DebiCheck 

DebiCheck is an industry-led solution that protects consumers from fraud while helping businesses reduce disputes and reversals. When a DebiCheck collection is initiated, the bank prompts the customer to review and accept the mandate terms via digital signature. When accepted, the customer’s bank records the response, which authorises subsequent collections from the account. This makes it much more difficult for the customer to dispute the transactions, and protects customers from unauthorised debits on their accounts.

Card

Recurring debits can be set up on a customer’s card using tokenisation to enable headless payments without the user present. These automated, pre-scheduled transactions reduce instances of late payments and improve customer satisfaction, as customers can easily manage, renew or cancel their subscriptions at any time. However, card payments have higher fees for merchants vs debit order transactions, making this a better fallback option. 

Risk of fraud

Customers can easily cancel or dispute EFT debit orders, which can result in a failed collection. The business will often incur fees on failed collections, in addition to losing out on revenue not collected. When a collection is disputed, the debtor’s bank queries the creditor’s bank, which then requests their customer (the creditor) to provide a copy of the agreed mandate. If a copy is not provided within the specified timeframe, the collection is reversed. If the mandate is verified, business continues as usual, with the debtor and creditor resolving differences outside the banking system.

EFT debit orders tend to have high rates of disputes and as a result can be an expensive way for businesses to collect from their customers, even if the initial mandate comes at a lower cost vs other solutions like DebiCheck. Without a traceable mandate record and an automated, streamlined process to authenticate mandates, EFT debit orders are more likely to be disputed than alternative methods, costing businesses much more in lost revenue and fees for failed collection attempts. 

How DebiCheck mitigates fraud risk

DebiCheck is designed to mitigate the risks of fraud commonly associated with debit orders. It features a bilateral verification process, ensuring the customer has authenticated and agreed to the debit order before it proceeds. Under DebiCheck, a mandate cannot be created without the customer’s explicit consent and authentication, making it almost impossible for the customer to contest authorized payments. 

Many people ask: Is DebiCheck safe? Here's why DebiCheck is safer:

• Digital consumer confirmation (mandate authentication):  With DebiCheck, consumers must authenticate the mandate digitally with their bank before any transactions are processed. This step ensures that the consumer is fully aware of the payment arrangement and that the details (amount, date, and merchant) are correct. With Stitch, customers can also confirm a DebiCheck mandate at POS using card present, via TT3 realtime.
• Unique mandate reference: Each DebiCheck transaction has a unique reference number that is linked to the specific consumer's approval. This reference ensures that, even if someone tries to alter or resubmit the mandate, they cannot change it without the consumer’s direct approval.
• Real-time notification: Consumers receive real-time notifications when a mandate is created. This allows them to spot any unauthorized mandates immediately. If a fraudster attempts to set up a payment without the consumer's knowledge, it can quickly be flagged.
• Mandate control and visibility: Consumers can track their DebiCheck mandates, manage them via their banking app and easily cancel any mandates they did not authorize. This visibility and control reduce the chances of fraudulent debits.
• Biometric and multi-factor authentication: DebiCheck integrates with banks' mobile apps, which often use multi-factor authentication (MFA) and biometric verification (e.g., fingerprint, face recognition) to confirm the transaction. This makes it harder for fraudsters to carry out unauthorized transactions.
• Verification of merchant details: Before confirming the mandate, the customer is shown key information about the merchant or service provider requesting the payment. This prevents fraudsters from posing as legitimate merchants, as the consumer can verify the merchant’s details during the approval process.

What kinds of recurring collections can DebiCheck be used for?

Subscription services

Subscription-based services such as entertainment streaming, gym memberships, data or cellular plans and more can use DebiCheck to securely collect monthly fees.

In cases where your customers do not want an automated renewal of services, you can give them more control to choose the period they prefer and use those terms in the DebiCheck mandate. The customer will get a copy of the DebiCheck mandate and authorise the collection. Once the period ends, the bank stops processing payments, reducing disputes and manual mandate tracking on your end.

Regular recurring payments 

Businesses that require regular recurring payments might include insurance businesses, lenders and financing solutions, regularly recurring savings or investment deposits and others. These businesses often require customers to make consistent payments at regular, pre-set intervals – whether monthly, annually or otherwise.

Seen as a ‘set it and forget it’ solution, DebiCheck can enable customers to easily create recurring payment plans that are debited directly from their bank accounts. This ensures that customers electronically sign a mandate with an agreed payment schedule, and reduces failed or missed payments by automatically debiting the customer’s account.

The benefits of DebiCheck for businesses

DebiCheck collections are prioritised above all other collection methods when it comes to settlement. These transactions are processed in the early morning window, ensuring that businesses have a higher collection success rate against their customers’ accounts. 

DebiCheck transactions are also more secure because the mandate has been authenticated digitally by the payer. The bank’s digital record of the approved mandate legitimises the transactions, guaranteeing that service providers are paid. Similarly, the traceability and transparency of the digital mandates protect consumers’ accounts from unauthorised debits. 

While investing in a system that supports DebiCheck can be expensive, over time the reduced number of disputes and reversals that are common with unauthenticated debit orders can save businesses significantly on resources spent managing failed payments, as well as on fees for failed collections and on generally uncollected mandates. 

The benefits of DebiCheck for customers

DebiCheck gives customers more control over their finances and recurring payments from their accounts. Not only is it easier for them to protect themselves against unauthorised debit orders, but they are able to specify the amount and date they are willing to pay. This can conveniently be done through their device, at a point of sale, or at some ATMs. 

Having this level of control over their debit orders allows customers to ensure that they choose times to pay when they have funds in their accounts. They can also manage their day-to-day budgets more accurately. 

What industries can benefit from DebiCheck? 

DebiCheck is ideal for any industry where recurring payments are part of their incoming cash flow. This includes:

• Insurance
• Financial services
• Telecommunications
• Healthcare
• Entertainment

DebiCheck mandates

DebiCheck provides businesses with three ways to initiate a DebiCheck mandate request:

Transaction Type 1 (TT1) are mandates sent to the debtor bank in real time. The mandate can be authorised immediately or until 8pm same day. This type is commonly used for single mandate requests. If the customer fails to authorise the mandate in that time, the business must start again.

Transaction Type 2 (TT2) mandates are sent to the debtor bank overnight. The customer then has two days to action the request. This type is commonly used for batch mandate files. Again, if the customer fails to authorise the mandate in that time, the business must start again.

Transaction Type 3 (TT3) uses card present authentication at point of sale (POS) to immediately authorise the DebiCheck mandate, enabling a more efficient and effective way to authorise debits, during the course of the initial transaction.

Best practices for DebiCheck setup

Making collections as easy and smooth as possible, as well as ensuring adequate fallbacks are set up and proper data collection is in place, is critical to a successful DebiCheck system. 

Multi-method collections

While it’s common knowledge now that offering a wide range of payment methods is more likely to  help customers convert, with DebiCheck this can manifest in different ways. 

It can be as simple as allowing a customer to decide which of their accounts they wish to pay the recurring payments from. It can also include allowing a customer to pay in-store using one method, then set up a DebiCheck with a different payment method. Customers could also choose a fallback method or account if a collection fails, such as card or Pay by bank. 

Ensuring proper data collection + internal processes

Some DebiCheck collections fail if the mandates are not properly stored and the process managed efficiently within the business. For example, ensuring the status of mandates and collection data is consistently updated and monitored before attempting collection, and relying on multiple fallback banks in the event of failure.

Giving customers this level of customisation and making it feel seamless ensures that collections are rarely missed. 

There are plenty of set up options available, depending on the business use cases. Stitch can help you find the right sign up flow for your specific needs, and those of your customers.