How bad debit order disputes really are in South Africa

Almost 10% of NAEDO (Non-Authenticated Early Debit Orders) are disputed on average per month in South Africa.

This is according to the Ombudsman for Banking Services, which spoke to MyBroadband about the matter.

The information follows a look by MyBroadband into the state of fraudulent debit orders in South Africa, and the upcoming DebiCheck system which aims to remedy the situation.

The building of DebiCheck by the payments industry follows a request by the SARB to solve issues around debit order disputes.

DebiCheck aims to eliminate unauthorised debit orders by requiring bank customers to electronically confirm new debit orders placed on their accounts.

A potential issue with the service during its initial phases, however, is that consumers cannot select which companies use DebiCheck when placing a debit order on their account – companies must choose to use DebiCheck.

The Payments Association of South Africa (PASA) said it is a long-term goal for DebiCheck to be used on all debit orders.

Initially, however, DebiCheck will target debit orders that are processed early.

One of the reasons for this approach is that the majority of disputes are currently being recorded in the early debit order space, said PASA.

Debit order disputes

The Ombudsman for Banking Services told MyBroadband that debit orders now have their own complaint category, due to their increasing volumes.

“Previously, it was categorised under Current Accounts. They featured at 3% of the cases opened,” it said.

The Ombudsman provided figures on debit orders in South Africa, as detailed in the table below, to illustrate the large number of disputes that are being actioned.

A summary of debit orders and related disputes, based on average monthly figures as at November 2017, are listed below.

As stated by PASA, NAEDO disputes are a standout problem area for banks and their customers.

Debit Orders in SA
Type Debit Orders AEDO NAEDO
Volumes 36.6 million 1.4 million 14.8 million
Values R66 billion R1.8 billion R11.5 billion
Unsuccessful 9.7% monthly volume 22.5% monthly volume 24.5% monthly volume
Disputes 1.6% monthly volume Not disputable 9.5% monthly volume

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How bad debit order disputes really are in South Africa