Debit Orders and Stop Orders. Know the difference

How Debit Orders work 

• To understand what a debit order is, think of it as a payment method where a company deducts a pre-agreed amount from your bank account on a specific date, using a third-party processor like Netcash. Only the service provider can cancel the debit order – not the customer.
• The third-party uses a bank or third-party processor to deduct the agreed amount of money from the account holder’s bank account.
• Only the third-party or the company with which the customer has signed the agreement has permission to cancel the debit order.

What are the benefits of Debit Orders?

Increases cash flow

Control over debit orders means you improve your cash flow. Getting paid on time means your cash flow will be automatically more consistent. A positive cash flow results in not needing to worry about putting any business plans and operations on hold; you can just focus on growing your business.

Safe and convenient

Unlike a stop order, which is set up directly with the bank, a debit order ensures businesses receive payments automatically without the customer needing to initiate them. Customers do not need to remember to make manual transfers. Funds are automatically deducted from their bank accounts, which is great for recurring payments and ensures you are paid on time.

A comprehensive payment report is available to track who has paid you and analyse your debit order collection success rates.

Ensures payments are made on time

Since debit order payments are automatic, they will always be made on time. Customers will not need to remember to make payments or be concerned about missing payments. It decreases the likelihood of missed or skipped payments, and payments will be received on the same day every month.

For debit orders to be successful, customers need to ensure sufficient funds are available in the account every month.

DebiCheck Debit Orders

To further understand how a debit order works securely, the industry introduced DebiCheck to prevent unauthorised transactions.

A DebiCheck debit order system requires explicit electronic consent from the bank account holder via their bank prior to any debit order being processed.

You can debit a bank account confidently as the likelihood of transactions being disputed is drastically reduced. Bank account holders have the comfort of knowing that the debit order can only be processed on the terms as agreed by them.

Debit orders are a simple and efficient way to assist you in keeping up to date with your monthly repayments.

Learn more about how debit orders can save you time.

Stop Order vs Debit Order – Key Differences

If you’re not sure about the difference between a stop order and debit order, here’s a simple comparison to help you decide which suits your needs.

Frequently Asked Questions

About Netcash

Established in 2003, Netcash is a payment solutions provider delivering debit orders, salary and creditor payments, Pay Now, eCommerce, and risk report services to South African businesses and organisations. The company provides multiple innovative and integrated online payment solutions that are efficient, simple, and cost efficient. Netcash is registered with the FSCA, PASA and is PCI DSS Level 1 compliant.

www.netcash.co.za

A debit order is an efficient way to collect recurring payments where revenue is dependent on customers making monthly payments. Instead of manually doing so, these are automated, taking the effort out of paying.

Netcash acts as a transparent middleman between your company and the individuals from whom you wish to collect recurring payments for services or products. Whether you’re a new up-and-coming business or an established entity, a well-regulated debit order service provider is essential to reduce customers’ debit order disputes.

Are you unsure how debit order disputes work and what exactly you’re entitled to when this issue arises? We’ll guide you through the nitty-gritty of this recurring payment commitment and the inner workings of the debit order dispute.

What is a debit order dispute?

Before diving into the meaning of a debit order dispute, it’s crucial to understand what qualifies as one.

A debit order is an agreed-upon and authorised request for a specified amount of money to be withdrawn from your customer’s bank account; commonly, a monthly payment that seldom doesn’t change outside of annual price increases.

This agreement can be a contract, but the individual’s bank will need a mandate. Although the bounds of these mandates can differ, they are usually determined by frequency and amount.

If a customer encounters a deducted amount that is outside the bounds of your agreement with the third party, they can contest and request a debit order dispute. If the bank approves a debit order dispute, your company is liable to pay the customer back the amount disputed.

The importance of following PASA rules

This is why following Payment Association of South Africa (PASA) debit order rules is essential to protect your company from disputes and ensure compliance. PASA is generally seen as the debit order law South Africa follows and is the payment system management body.

Netcash has various security measures in place to minimise the risk of debit order fraud. If the customer chooses to report a debit order dispute at the bank, the debit order will be investigated to ensure its validity.

This is where your company will be requested to provide evidence of the debit order mandate to be absolved from the specified dispute. If you have the necessary paperwork and information to supply the bank, you’ll more than likely not be liable for any payouts to customers. This refers to documents such as valid voice, electronic, or paper mandates.

Can a customer cancel their debit order agreement?

As a company or third-party entity, you are responsible for adhering to the guidelines and terms of conditions provided.

Be sure, in your customer’s debit order agreement or mandate, that you have the right to cancel their financial responsibility at any time. In that case, you’ll have the legal right to proceed with their debit order cancellation.

If a customer has requested to cancel the debit order in writing and is in compliance with your debit order contract requirements, it’s in your best interest to stop the recurring transaction.

Otherwise, customers may involve their given bank or Netcash in order to absolve them from their debit order, which provides a bad reputation for your business.

Disputed debit order | Netcash policy

It’s important to note that not all instances of deemed disputes regarding debit orders can be processed and resolved through a payment resolution. There are many requirements that need to be in place in order to receive and process a debit order dispute:

• Suppose there was an error in the amount that your company requested from the client for payment. This would generally occur for several reasons, such as human error in checking the correct client information and agreed-upon amount.
• Customers may also file a dispute if they believe the deduction was an unauthorised debit order or if the reference is unclear. This could be due to a lack of research and education regarding the debit order’s terms and conditions (including the possibility of a different reference name on their account).
• If customers fail to realise or are made aware of any annual increase in transactions, they could be more likely to dispute a debit order.

Customers use debit order disputes to report that they believe the transaction is outside the agreement. So, it’s crucial to use the bank approved mandate that has been provided, as this will be the only approved mandate that will hold up under any scrutiny by the bank that explicitly stipulates what the customer agrees to be debited for.

Businesses must also manage their mandates properly. While keeping paper mandates is possible, it is risky. They could get lost or damaged over time, making digital mandates the best way forward.

Embracing Netcash and an approved ISV makes uploading mandates to a debit order management system easier than ever. This allows businesses to send out virtual mandates or mandates without having to worry about data safety. Incorporating such a system is also a fantastic way to record and recall mandates.

The policy of Netcash, in terms of legality and debit order service terms, stipulates a variety of requirements to conduct business. By adhering to these terms, your customer will have less likelihood of receiving a debit order refund through a dispute (which means less time and unnecessary back payments spent). These terms include:

• No potentially fraudulent third-party interference when sending instructions and customer details to Netcash.
• A debit order mandate from your customer on the bank-approved mandate.
• Inform the customer that their personal account might reflect a deduction from Netcash and the name of your company on their bank statement. It remains your responsibility to educate your clients on what to expect.
• Reporting any issues with Netcash instruction at least two days before any specific transaction is supposed to occur.

How to dispute a debit order

To dispute a debit order, customers should first verify that the transaction falls outside their agreement. If it does, they can contact their bank with a formal request. Be prepared to supply the necessary mandate or agreement details. Using a system like Netcash makes tracking these mandates easier and strengthens your case in the event of a dispute.

Frequently asked questions – disputed debit order

As there is a wide variety of factors that can affect debit orders and disputes, it can be challenging to keep your head above water. Let’s take a look at a few common queries in order to understand debit order disputes and other related finance questions better:

Debit order vs. stop order?

Debit and stop orders are entirely different entities and require distinctive authorisation by a specific third party. A stop order in banking is an instruction to allow payments to reoccur on an agreed-upon basis between you and your bank.

A debit order is an agreement mandating that your company retrieve a predetermined amount from the customer’s bank account.

What can a business do to prevent debit order disputes further?

It’s vital for companies to keep track of customer debit order cancellation requests to reduce actionable debit order disputes. This way, you’ll be able to cancel debit orders before transactions occur without any bank involvement.

This will also create a positive and hassle-free cancellation process for your customers, which generates a pleasant customer experience from doing business. Also, this shows the legitimacy of your business and hopefully ensures positive reviews.

If a customer can prove to their bank that they have requested a mandate cancellation from your business (that complies with your terms and conditions), they can issue a dispute.

Debit orders have simplified payments for many South African businesses and their clients, though challenges like debit order fraud remain significant. That said, this convenience in the payment system has faced a few issues. One such challenge is that of debit order fraud.

A 2019 investigation found that debit order fraud steals around R1.6 billion from South Africans annually. This does not only affect people who’ve had money taken from their accounts — small businesses can be affected, too. It puts business owners in a position where they need to improve how they manage debit orders.

Since its 2017 launch, DebiCheck has become a cornerstone in combating unauthorised debit orders, significantly reducing instances of debit order fraud across South Africa.

However, this doesn’t mean you can rest on your laurels just yet. Read on to discover how you can educate and protect both your company and your clients from debit order fraud.

Many business owners face the challenge of chasing customer payments each month, a time-consuming task that can be frustrating. The time and effort spent on invoicing admin every month can be less than ideal and, quite frankly, frustrating. But what if there was a way to automate each payment so you don’t have to worry about that? Well, that’s where debit orders come in.

As a business owner, offering debit orders to your customers can be incredibly beneficial, as they simplify day-to-day tasks and streamline business operations. They effectively put an end to the struggles that come about with your customers’ recurring payments.

Now, let’s take a closer look at everything you need to know about the benefits that come along with using debit orders for recurring payments.

Top tip: It’s easy to confuse the two, so here is more information on a debit order vs. a stop order.

As a business owner, you’ll likely want to simplify your finances and more effectively manage recurring payments. But how do you do that? Are debit orders the solution? To answer that question, you’ll need to understand more about what debit orders and recurring payments entail.

Read on to find out more in this regard.

A debit order is a financial agreement between a service provider and a customer allowing them to deduct an agreed-upon debit amount from the customer’s account each month.

So, for all services or repayments, money will leave the customers account to the service provider automatically on an agreed-upon scheduled date. Debit orders also give you a detailed payment history, so you’ll always have those to refer back to for tracking your collections.

Debit order specifics differ depending on the bank or debit order collection services you’re using, but generally, they can be split into two types:

• Electronic funds transfer (EFT) debit orders: This is what you’d consider the golden standard and the most commonly used debit order. An EFT debit order is simply one you have authorised, whether by a written or electronic that will go off each month without additional authorisations.
• DebiCheck debit orders: DebiCheck is a relatively new introduction to the debit order space. They have essentially replaced Authenticated Early Debit Orders (AEDOs) and Non-authenticated Early Debit Orders (NAEDOs). DebiCheck allows you a greater sense of safety and security by requiring the customer’s electronic confirmation before the first debit order is processed. Thereafter, the debit order will run according to the agreed mandate. This acts as a signed mandate where the customer agrees to the frequency and amount debited by the entity. As an added convenience, this is all done via the banking app on their mobile device.

At the end of the day, each debit order type has its pros and cons, so what you decide depends on your circumstances and needs as the service provider.

Top tip: Here’s more information on Netcash and DebiCheck debit orders that have gained traction across the financial space.

Recurring payments allow businesses and service providers to deduct money from a customer’s account at predetermined intervals. These intervals are typically monthly but can also be deducted on a yearly, weekly, or daily basis.

Recurring payments come in two varieties: fixed and flexible.

• Fixed payments are when customers are charged the same amount at the end of each payment cycle (unless there is a notified price increase). Examples would be monthly membership fees or insurance policy payments.
• Flexible payments, on the other hand, change depending on how much of the service the customer uses, and they are charged accordingly (i.e., pay as you go). A pay-as-you-go, flexible payment example would be an internet service provider (ISP) charging variable amounts based on usage per month for a company’s VOIP service.

Businesses that use this model include membership businesses (e.g., gyms), utility providers (e.g., phone bills and contracts), financial services (e.g., loan repayments), and subscription billing services.

With that said, having a bunch of recurring payments to chase up at the end of the month for you to sort out can be taxing – that’s where debit orders come in.

Debit orders offer plenty of advantages for the customer. They provide a convenient method of payment, allowing the customers to ensure important payments are made on time and at the same time each month. That means less hassle for your business and no more forgotten payments. Plus, there will be fewer errors to deal with since customers aren’t manually entering banking details or making an EFT.

But that’s just the tip of the iceberg. Here are the top benefits of debit orders for recurring payments that customers can expect.

First things first, debit orders are pretty straightforward when it comes to setting up. The specifics might differ slightly depending on your customers’ needs, but generally, the process is similar across the board.

It starts with the customer signing a mandate in order to set up the debit order. Once those technicalities have been sorted and their banking details have been provided, their bank can be contacted to deduct the money from their account. After that, your customers don’t have to worry too much about it, that is, if no changes to the agreement are needed (e.g., changing the payment date).

There’s nothing worse than chasing payments at the end of the month. Customers usually have to sort through payments manually, which can lead to all sorts of delays. What’s even worse is forgetting to make a payment on time. That’s why debit orders can be a great solution for recurring payments.

Debit orders are automated, so your customers don’t have to worry about administration at the end of each month. Instead, they can be sure that the money will be deducted from their account on the agreed-upon date. The customer will never miss a payment as long as sufficient funds are in their account.

A credit score is a numerical value that lets service providers know how trustworthy a customer is when it comes to paying their bills. The higher a credit score, the better chances they have at being approved for things like credit cards, loans, contracts, and things of that sort. But how does the debit order come into play here?

Simply put, your customer’s credit score improves when they open accounts, keep up to date with payments, and ensure they have a low balance of outstanding fees. Since debit orders go off automatically on a set date, they don’t have to worry about having a delayed payment. So, as debit orders continue to go off and those payments are made, the customer’s credit rating is improved.

Top tip: Here is more on how to improve your credit score.

In today’s modern age, cash payments are becoming a thing of the past, which makes sense since everyone knows how risky it can be to carry a lot of money around. Plus, cash payments can be tedious and time-consuming. Debit orders are entirely cashless, removing the risk entirely and giving your customers peace of mind.

Another bonus of the debit order is that your customer can customise each payment to suit their financial situation.

Do they have five different debit orders going off in a month? No problem. They can set each payment day in order of highest priority to ensure the most important bills are paid first. Perhaps they want all of their debit orders to go off on the same day. Either way, debit orders allow that freedom and customisation.

DebiCheck debit orders, for example, are prioritised. By using DebiCheck for their most high-priority payments, customers can ensure that those are deducted from their accounts before anything else. This is especially useful for important payments (e.g., home loans, medical aid, etc.) that shouldn’t be going off late or when fewer funds are available in their account.

Everyone knows that creating a financial budget is a great way to keep track of income and expenses and reach any savings goals that you may have. Debit orders make it easier for your customers to make the most of budgeting. So, since they will always know precisely how much money will be deducted from their account and on which day, it’s easier to plan ahead.

When all is said and done, if you consider every benefit this far, it’s clear that they all contribute to your customers’ peace of mind. No more worrying about missing a payment, losing out on subscription services, or paying penalties for being late. Since debit orders are automatic, they won’t have to worry about forgotten payments negatively impacting their credit score.

Overall, debit orders allow customers to be more confident in their financial situation and ultimately benefit your business (more on that next). Who wouldn’t want that?

On the other side of that mandate, of course, lies the business and service provider. Debit orders can make running the business itself much more effortless. Using debit order collections isn’t new in the business world, but some might not know the advantages this system can provide.

Through debit order systems and online subscription billing platforms, like that offered by Billdozer, you can better manage business finances and keep on track towards your goals. Here are some of the top benefits of using the debit order system for small businesses (or any business for that matter):

Whether it’s a small, medium, or massive-scale business, measuring the amount of cash coming in and out of a business is always important – this is the company’s cash flow. Any successful business should seek out a positive cash flow (more money coming into your business and less flowing out).

Keeping track of your business’s cash flow is essential for you to keep on top of things. It not only lets you know where your money is being spent but also gives you an idea of how much money is available to spend at a given time.

That being said, companies that use debit order collections and have control over when payments are received don’t have to invest too much time and energy in delayed payments. Debit orders also allow you the foresight to know exactly when money will be flowing into the business, creating an overall more consistent cash flow.

This foresight is additionally beneficial as it is good for making projections within the company and ultimately improves budget planning.

As a business owner, there’s enough to worry about as it is. With paying salaries, watching over your cash flow, advertising – the list goes on. How is there time in the day to fill all these roles while still staying afloat (and sane)? Well, that’s where debit orders serve another key advantage.

With the introduction of the right debit order collection software, you can easily access electronic, online documentation of each debit order and payment. Combine that with automated customer invoices, and you’ve got yourself a lot less to do. Not only does this save you time, but it also helps business processes to happen more efficiently.

Top tip: Here’s more information on how debit orders save time.

It doesn’t matter whether you have a large, booming enterprise or a fresh, out-of-the-water small business – debit order collection services are widely accessible, and anyone can give it a go. Of course, you should always consider the type of business you’re running, the goals, and the financial situation before deciding which system to use.

This goes hand-in-hand with time-saving and convenience. Debit order collection systems often create invoices independently and store them online for extra convenience. They help to free up some of your time, so you don’t have to worry about manual processing, invoice creation, or collecting funds. Everything is quick and straightforward.

Debit orders will ultimately lessen the administrative burden and let you focus your energy elsewhere, improving the business as a whole. Since debit orders are automated, and late payments are fewer, there will be less of a need to send follow-up communications and chase customers for payment.

With debit orders, gone are the days of worrying about a customer’s late or missed payments. Debit orders also result in fewer administrative and manual processing operations to worry about.

Top tip: Want to find more ways to streamline business processes and ease your worries? Here are some tips and tricks on how to get paid faster by making bill payments easier for your customers.

If you still have some things you aren’t sure of after all that, or you’re simply curious, don’t fret. Here are some of the most frequently asked questions surrounding debit orders for recurring payments.

With all that being said, there’s no denying that debit orders are a game changer when it comes to simplifying your financial situation for both customers and service providers. So wouldn’t you say it’s about time you hop onto the proverbial train and take advantage of these incredible debit order benefits?

Speaking of modern-day payment solutions, why not learn more and dive deep into the evolution of mobile payments?

An advanced debit order service is now available to Netcash customers – DebiCheck Debit orders, a system that protects both parties involved in the transaction.

DebiCheck is a secure debit order system requiring the bank account holder to give specific electronic permission (via their bank) once-off at the start of a new contract, prior to any debit order being processed. DebiCheck replaces both AEDO (Authenticated Early Debit Order) and NAEDO (Non-Authenticated Early Debit Order) transactions.

You can debit a bank account confidently as specific consent is received via the account holders bank and the likelihood of transactions being disputed is drastically reduced. Bank account holders have the comfort of knowing that the debit order can only be processed within the terms as agreed by them.

DebiCheck does not replace Same-day and Dated debit orders but can be used as an alternative.

With DebiCheck debit orders, bank account holders will need to confirm debit orders electronically and on a once-off basis. The intention is for customers to confirm the details of the debit order with their bank before it is processed to their account. |Standard debit orders do not require electronic confirmation and rely solely on a signed or voice recorded mandate.

Reduced dispute rate

Significantly reduce debit order disputes with DebiCheck’s initial authentication of mandates, making unauthorised disputes much less likely.

Eliminate consumer abuse

Clients returning debit orders to boost their cashflow will be drastically reduced.

Tracking

Should funds not be available when the debit order is presented, banks will keep checking the account for available funds for the tracking period specified which will improve your collection rate.

Netcash clients have 3 options for submitting authentications:

• Capture/ upload Electronic Mandates that include requests for authentication or
• Capture DebiCheck authentication details manually in your Netcash account or
• Upload DebiCheck authentication requests

Netcash

• Submits authentication requests to account holder’s bank
• Confirms authentication results
• Automatically updates Masterfile with debit order detail

Account holders’ bank

• Authenticates DebiCheck request by various electronic channels available to the account holder. Methods may include banking Apps, USSD, ATM or branch.
• Communicates results to Netcash

Account holder

• Receives authentication request
• Verifies amount, date, and terms of the debit order
• Accepts or declines the request

Settlement 

• Successful collections will be credited to your Netcash account once payment is received from the account holder’s bank
• Bank accounts can be tracked for up to 10 days
• After the tracking period has expired, unsuccessful transactions with zero values will be processed to the Netcash account for ease of reconciliation

Optimise your payment collections with DebiCheck’s electronic authentication process, ensuring higher success rates and minimal disputes. Get started with Netcash today!