Direct debit or direct withdrawal is a financial transaction in which a person withdraws funds from someone else's bank account. Formally, the person who directly withdraws the funds ("payee") instructs his bank to collect (that is, debits) the direct amount of the other person's (payer's) bank account designated by the payer and pays the funds into the designated bank account by the payee. Before the paying banker will let the transaction take place, the payer must notify the bank that he has authorized the payee to directly withdraw the funds. This is also called pre-authorization of debit (PAD) or pre-authorization payments (PAP). Once the regulatory authority, the direct debit transaction is usually processed electronically. Direct debit is typically used for repeat payments, such as credit cards and utility bills, where payment amounts vary from one payment to another. However, when authorization is in place, the circumstances under which the funds are withdrawn as well as the date and amount is a matter of agreement between the payee and the payer, with which the bankers are not worried. In countries where authorization is set up quite easily, direct debit can also be used for irregular payments, such as for email order transactions or at point of sale. The payer may cancel the authorization for direct debit at any time, and the banker may refuse to initiate the debit if the transaction will violate the terms of the bank account where payment should be made, for example if the payment is made causing the account to be excessive. (Banking law does not allow banks to change the amount of payments.)
Direct debit instructions are different from direct deposits and standing order instructions, initiated by the payer. A standing order involves a fixed amount of payments that are paid regularly, while direct debit can be any amount and can be regular or periodic. Nor should they be equated with a Continuing Payment Authority, in which the payee collects money whenever he feels indebted.
Direct debit is available in a number of countries, including Britain, Brazil, Germany, Sweden, Spain, South Africa, Switzerland and the Netherlands. Direct debiting is based on individual country regulations, and is usually limited to domestic transactions in those countries. The exception in this case is the Euro Single Payment Area which allows for cross-country (and domestic) direct debit Euro-denominated since November 2010. In the United States, direct debit is processed through the Automatic Clearing House network.
Video Direct debit
Authorization
Direct Debit Instructions must in all cases be supported by some sort of authorization for the payee to raise funds from the payer's account. There are usually two methods to set the authorization:
One method involves only the payer and the payee, with the payer authorizing the payee to collect the amount due on his account. However, the payer may instruct his bank to return a Debit Direct note without giving a reason. In that case, the payee must pay all costs for the transaction and ultimately lose the ability to start Direct Debit if this happens too often. However, it still requires all account holders (not just payers) to watch the statement and request a refund if necessary, unless they have instructed their bank to block all Direct Debits.
Another method requires the payer to instruct his bank to honor the Direct Debit record of the payee. The payee is then informed that he/she is now authorized to initiate the Direct Debit transfer from the payer. While this is safer in theory, it could also mean to payers that it is more difficult to return a debit record in case of errors or disputes.
Maps Direct debit
Direct Debit in different countries
Europe
In Europe, SEPA Direct Debit Funds Transfer (SEA) and SEPA funding schemes are available in each SEPA country for payment in Eurozone (EU Regulation 260/2012).
SEPA Direct Debit initially worked side by side with a national direct debit scheme until August 1, 2014. From that date, only SEPA Direct Debit is allowed to collect euro currency payments in the EU. In October 2016, SDD and IBAN became mandatory methods for euro transfers in all EU and EEA, but not mandatory for transfers in other currencies.
United Kingdom
Direct Debit is a payment method for recurring payments in the UK. This is the third most popular payment method in the UK, after a cash and debit card, according to Payments UK. Bacs Payment Schemes Limited is the organization responsible for Direct Debit and Bacs Direct Credit schemes. Direct Debit was created by Alastair Hanton when he worked at Unilever as a way to collect payments more efficiently. Direct Debit accounts for 73% of household bills and nearly nine out of 10 UK adults have at least one Direct Debit commitment. In fact, by 2015, nearly 3.9 billion Direct Debit is processed, representing a year-on-year increase of 239 million that surpassed the previous record for an annual growth of 161 million, set in 2004. 4.07 billion Direct Debit is processed at by 2016, an increase of 4.9% from 2015. British payments predict the figure is expected to rise to 4.4 billion by 2026.
Authorization
To set up payment with Direct Debit, the payer must complete the Direct Debit Instruction to the merchant. These instructions contain words approved by the bank that make it clear that the payer sets the ongoing authority for merchants to debit their accounts. The interface to complete the Direct Debit Instruction is controlled by the merchant, who then sends the data from the form to the customer's bank, via Bacs.
The UK Direct Debit scheme rules allow Direct Debit Instruction to be resolved in several ways:
- paper-based form, which requires a signature
- by phone using a formal script to collect all necessary information
- online, using an online application form approved by the bank
- through other interactive services, where the interface has been approved by the bank
Warranty
All UK payments collected by Direct Debit are covered by Direct Debit Guarantee, provided by UK banks and building communities.
Under the warranty, the payer is entitled to a full and immediate refund in case of an error in Direct Debit payment from their account. In the event of an error, the refund is paid promptly by the paying bank, which will then attempt to recover the money from the merchant bank, which in turn will seek to return the money collected from the merchant.
Under the Direct Debit scheme rules, merchants have very little reason to challenge the costs generated under Direct Debit Guarantee. Instead, they may pursue any payment that they believe has been returned unlawfully to the payer directly through a small claims court.
Access
Before a company or organization can collect payments with Direct Debit, they must be approved by the bank, or use a commercial bureau to collect direct debit payments on their behalf. This approval process ensures the company will be able to operate within the rules of the direct debit scheme and maintain the integrity of the scheme.
If a large number of customers complain about direct debits made by a particular service user, then the service user may lose his ability to set up direct debit.
Dormansi
Any direct debit instructions that have not been used to raise funds for more than 13 months are automatically canceled by the customer's bank (this is known as the "dormancy period"). This can cause issues when credentials are used infrequently, for example, taking payments to resolve a rarely used credit card bill. If the credit card company has not collected payment using the Direct Debit mandate for more than 13 months, then the direct debit mandate may have been canceled due to inactivity without the customer's knowledge, and direct debit claims will fail.
Fraud
The issue of direct debit fraud is so widespread according to research by Victoria Victoria Insurance that more than 97,000 Britons have fallen victim to crimes governing fraudulent scams from their accounts. Average Ã, Â £ 540 missing before customer notification. Direct debit payment fraud in 2010 accounted for approximately 10.6% of all identity fraud cases. The rate of direct debit fraud is set to grow to 41,000 cases annually by 2013, equaling 57%.
However, the problem is exacerbated by some banks themselves for failing to implement any controls that prevent companies or fraudsters taking money from business and consumer accounts. Disrupted and reversed direct debit or erroneous debit problems are expected to weigh on British consumers of £ 385 million in 2010. For those customers who know, they take an average of four months to pay attention. Although no specific figures are collected, it seems that a large number of people lose a lot of money each year because outright obsolescence is not noticed or rediscovered.
On January 7, 2008, Jeremy Clarkson found himself the subject of direct debit fraud after issuing a bank account and sorting code details in his column on The Sun to make a point of public concern over UK children's benefits 2007 unnecessary data scandal. He wrote, "All you can do with them is put money into my account.Not need to get it out. Honestly, I never know palaver like that about anything". Someone then uses these details to set up a direct debit of £ 500 to charity Diabetes UK. In the next Sunday Times column, Clarkson wrote, "I was wrong and I was punished for my mistake."
Training
Businesses and organizations that collect payments through Direct Debit are instructed by Bac for mandatory training. Whether businesses are collecting independently or through bureaus, their relevant staff need to understand the basics of payment methods. Courses are available through Bacs or through an accredited external training. There are only four recognized companies in the UK that provide accredited training in Bac: Accountis (DH), Bottomline Technology, Clear Direct Debit, and SmartDebit.
German
In Germany, banks have generally provided direct debit ( elektronisches Lastschriftverfahren (ELV) , "Lastschrift", Bankeinzug ) using both methods since the advent of so-called Giro in the 1950s.
The EinzugsermÃÆ'¤chtigung ("direct debit authorization") only requires the customer to authorize the payee to create the collection. This can happen in written form, orally, via e-mail or through a web interface created by the payee. Although organizations are generally asked not to instruct their banks to create unauthorized collections, these are usually not verified by the banks involved. Customers can instruct their bank to return the debit memo in at least six weeks.
This method is very popular in Germany because it allows quick and easy payment, and it is suitable even for a one time payment only. The customer may only authorize at the same time he or she orders the goods or services of the organization. Compared to credit card payments, which allow similar usage, the bank fees for successful collections are much lower. Often retailers such as supermarkets will process Girocards as direct debit transactions (ELV) after performing real-time risk analysis when the card is swiped. This is possible because the bank account number and the checking account account code are part of every Girocard card number (PAN), similar to the early 1990s 19 digit Switch card number. Customer agrees to direct debit by signing the back of the receipt, which usually contains a long contract text that also allows the reseller to contact the customer's bank and obtain their address in case the debit is returned ("RÃÆ'¼cklastschrift"). Direct debit is practically free for retailers, allowing them to save Girocard exchange fees (about 0.3%) to be associated with PIN-based transactions, but incurring a higher risk because payouts can be returned for any reason up to 45 days. Therefore, they are typically used to return customers who already have successful Girocard (PIN-verified) transactions in the same store or buy low-risk items or small tickets.
To prevent abuse, account holders should pay attention to their bank statements and ask their bank to return unauthorized (or false) debit records. Because fraudulent direct debit instructions are easy to trace, abuse is rare. However, there is a problem when the amount billed and collected is incorrect or too large. There are also cases of fraud direct deception in which fraudsters try to collect a very small number of individuals from a large number of accounts, in the hope that most account holders will be slow to raise issues about the small amount, allowing enough time for fraudsters to withdraw the money raised and disappeared.
The Abbuchungsauftrag ("post off") requires the customer to instruct his bank to respect the discharge records of the organization. Direct debit made by this method is verified by the customer's bank and is therefore non-refundable. Because it is less convenient, rarely used, usually only in a business-to-business relationship.
Dutch
In the Netherlands, as in Germany, account holders can authorize a company to collect direct debit payments, without notifying the bank. Doing so is very common, with as much as 45% of all banking transactions conducted through direct debit.
Transactions may take place, or only once. For both types of collecting organizations must enter into direct debit ( automatische incasso ) contract with their bank. For each transaction, account holder name and account number must be provided. Collecting organizations can then collect from any account, provided there is enough money in the account and no block is assigned to direct debit from the collecting organization.
Transactions can be contested depending on the type of transaction, the time since the transaction and the basis of the dispute. Official transactions of the current type can be withdrawn directly through the bank from the account holder within 56 days (8 weeks) from the transaction, with the exception of transactions related to chance games and perishables. Official one-time transactions can be withdrawn through the bank within 5 days. Unauthorized transactions can be contested via the bank within a limited time after the transaction.
Another security measure is a "selective block" in which the customer can instruct the bank not to allow direct debit to the specified account number. Blanket covers are also available.
Polish
In Poland, direct debit is operated by KIR (Krajowa Izba Rozliczeniowa) and participating banks as one of the functions of the Elixir cleaning system. The payer must authorize the payee by filling, signing and submitting a standardized paper form in two copies. One copy, after filling out the payment details and customer identification number, is sent by the payee to the paying bank, which verifies the signature. From now on, the payee can debit the payer's account. Since October 24, 2012 it is also possible to submit these authorizations via paying banks, often online.
The payer can:
- Undo all direct debit transactions:
- in 56 calendar days - individual,
- within 5 business days - other businesses and organizations.
- Suspend authorization so that future direct debit transactions are blocked.
- Revoke the authorization at any time either online or by submitting a paper form to the bank.
In case of canceling the transaction, the funds are immediately returned to the payer's account. Interest is also adjusted as if the transaction never happened.
Collecting fees through direct debit is largely supported by major players such as telecommunications companies, insurance and utilities and the bank itself but is not widely used by consumers because the bureaucracy is involved in direct debit arrangements.
ireland
The direct debit system in Ireland was previously operated by the Irish Payment Service Organization (IPSO). Following the integration of the Irish Banking Federation (IBF) with the Irish Payment Services Organization (IPSO), all content from www.ipso.ie is now hosted on the Irish Federation Banking and Payment website www.bpfi.ie
Direct debit instructions may be given in writing or by phone. There is protection for account holders who are debited in the event of a dispute. Ireland's payment system is in the process of migrating to SEPA and direct debit credits. The conversion deadline from legacy credit transfer and direct debit system to SEPA Eurozone system is 01.02.2014. SEPA Rules
Denmark
Direct debit is the preferred method of payment for routine household payments in Denmark. The service, relaunched in the early seventies, is called "Betalingsservice" and is used by about 96% percent of Danish households.
Japanese
Direct debit is a very common payment option in Japan. When signing up for a service, such as a telephone, customers are usually required to enter their bank details on the service delivery form, to arrange automatic payments, and the company they register will take care of the rest. Sometimes, but not always, customers are offered the possibility to enter credit card details, not bank account details, to have money directly debited from a credit card instead of a bank account.
Malaysia
In Malaysia, the direct debit system is available through a product known as FPX - Financial Process Exchange. FPX supports online direct debit as well as direct debit batch. This opens new doors for e-commerce in Malaysia, especially business to business (B2B) and business to commerce (B2C) payments.
FPX allows customers to make payments at e-market places such as websites and online stores and companies to collect large amounts of payments from their customers.
It leverages Internet banking services from participating banks and provides fast, secure, reliable, and real-time online payment processing. FPX provides comprehensive comprehensive business transactions, reasonable payment records, simplified reconciliation, and risk reduction as fund movements are among established financial institutions.
Supported by Bank Negara Malaysia and local financial institutions, FPX is operated by FPX Payment Gateway Sdn Bhd, a subsidiary of Malaysia Electronic Payment System (1997) Sdn Bhd (MEPS).
Australia
In Australia, direct debit is done through a direct entry system also known as the BECS (Bulk Electronic Clearing System) or CS2, which is managed by the Australian Clearing Association. The account holder can authorize the company to collect direct debit payments, without notifying the bank, but direct debit is not available in all financial accounts.
A common example of direct debit is to authorize a credit card company to debit a bank account for a monthly balance.
Many small companies do not have their own direct debit facility, and third-party payment services should be used to connect between billers and customer banks. For this, a small fee (usually $ 1-2 per transaction, put in the bill amount) is made by the payment service.
Direct credit and debit instructions are only available to institutional customers. Direct credit instruction is used for salary payments and other large-scale routine payments. Direct debit instructions are used by insurance companies, utilities, and other large organizations that receive regular payments. Although governed by APCA rules, the actual exchange of instructions takes place through bilateral exchanges. There is no central "clearinghouse" for direct bulk payment instructions.
United States
In the United States, direct debit usually means transfer of Automated Clearing House (ACH) from bank account to biller, initiated by biller.
South Africa
In South Africa, direct debit, also known as a debit order, is performed through ACB. The account holder can authorize the company to collect direct debit payments. The Client signs a debit mandate form that grants a company permission requesting to debit their account with a fixed or variable monthly value. This value can be repetitive or once-off. This is an effective, safe and more cost-effective alternative to receiving cash, by check or EFT (Electronic Funds Transfer).
There are three types of discharge orders commonly used in South Africa: EFT (Electronic Funds Transfer), NAEDO (Non-authenticated Early Debit Order) and AEDO (Authenticated Early Debit Order).
A new payment stream is being introduced by a South African Reserve Bank called AC or an Authenticated Collection. This payout flow will begin in September 2016 (early 2017) and aims to replace the current NAEDO payments stream. The purpose of AC is to reduce customer disputes and misuse of the debit order system. The AC payment stream will be known by the consumer as DebiCheck.
Swedish
In Sweden, direct debit is available, called "Autogiro". The amount is withdrawn from the payer's account at the request of the payee without specification. Approval is made once indefinitely for any combination of payer/payee, but may be withdrawn at any time. Requests are usually sent via a form from payer to payee, but in an internet bank it is also possible to request it. There's a newer variant too, called "E-facts", electronic bills. There the payer gets a specification on the computer (via the bank's web page) looks like a bill, and is asked to approve each payment, even if it can be set for auto approval.
In Sweden, the problem of direct debit fraud is much smaller than in the UK, because there are more stringent requirements on which companies can use direct debit. There are still claims that famous companies have taken too much money through direct debit.
Turkish
In Turkey, direct debit is widely used, for utility and credit card payments, as well as commercial transactions. However, while in another country the payee instructs his bank to make a collection, in Turkey the payer needs to authorize the bank directly. The use is different from standing orders, because the amount of payment is not fixed and the payment does not need periodic (eg Payment can be any amount and can be regular or regular).
See also
- Direct deposit
- Order standing
External links
- APCA, Australian Payment Cleanup Association
- www.bacs.co.uk
- South African Direct Debit Bureau
- DebiCheck South Africa
- List of direct debit terms
- Direct Debit transaction code used in the UK
- KIR (Krajowa Izba Rozliczeniowa)
- Corporate Collect - South African Debit Order Company
- Electronic Direct Debit Order Authorizations
- Debit Order in South Africa FAQ
References
Source of the article : Wikipedia
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