South Africa is the only country in the world that has implemented the he Early Debit Order (EDO) collection system. The EDO system consists of both the AEDO and NAEDO payment streams and have been in existence since 2006 to ensure a fair playing field for all participants.
The South African Reserve Bank has requested PASA to implement a new system called Authenticated Collections (AC) to replace the Early Debit Order (EDO) system which will be implemented from 30 September 2016.
This new system will give consumers upfront knowledge about their debits through an electronic authentication process, ensuring that debits will be authorised legally and rule out any cash flow management strategies from abusive consumers.
Time-frame(s) for the implementation of AC
The initial implementation date for Authenticated Collections was set for June 2015 which was subsequently revised by the SARB to 30 September 2016 as the final approved date.
In order to ensure a smooth transition, the industry has been granted a further migration period of nine (9) months until June 2017 for old payment instructions.
The deadline date for implementing Authenticated Collections are applicable to only the EDO collection users (AEDO and NAEDO) and are not applicable to normal EFT Debit users.
AEDO and NAEDO debits
The updated communication from the SARB, now stipulates that no new AEDO contracts will be allowed after the migration phase at the end of June 2017 and that no AEDO contracts will be allowed in the early processing window after June 2019.
This means that the current AEDO and NAEDO users who want to continue processing after June 2017 (for NAEDO users) and June 2019 (for AEDO users) would need to make use of the new Authenticated Collections system, aligned with their needs/requirements.
PASA will make provision for the transition period from the EDO system to the Authenticated Collections system. For NAEDO contracts specifically, a migration period of nine (9) months (1 October 2016 to 30 June 2017) will be granted.
Within this time-frame, users must identify and re-categorise NAEDO mandates to one of the following options:
- Qualified Early Debits (QED) or;-
- EFT Debits i.e. Debit Orders
The Qualified Early Debits (QED) will be allowed for processing in the ‘early processing window’ until 30 June 2019. Normal EFT debit mandates will continue to be processed as normal.
Qualified Early Debits (QED)
All NAEDO mandates, where the contractual term, which could be open-ended, goes beyond 1 October 2016 can be converted to Qualified Early Debit (QED) mandates.
These mandates will be uploaded into a Mandate Register at the relevant Sponsoring Bank and will be analyzed to see if they qualify for continued early presentation until 30 June 2019.
All mandates in this stage will be processed, provided that they are not disqualified at any time during this period.
Disqualifying criteria for QED are as follow:
- Seven (7) consecutive unsuccessful payments.
- Any dispute on the QED payment.
- Any stop payment.
At 30 June 2019, all QED mandates should be converted to either AC mandates or normal EFT Debit Order mandates. No Qualifying Early Debit (QED) mandates will be allowed for processing from 1 July 2019.
Qualifying Early Debit milestone dates
A summary of the different criteria and time-frames, as communicated by the SARB is set out in the respective diagrams below:
- NAEDO transactions may be processed together with AC and AEDO transactions in the ‘early processing window’ during the migration period (1 October 2016 to 30 June 2017);
- Only Authenticated Collections transactions may be processed in the early processing window from the end state (1 July 2019);
- No AEDO or NAEDO transactions may be processed in the early processing window in the end state, nor any other non-authenticated transactions;
- No NAEDO mandates will be allowed in the early processing window from 1 July 2017;
- As from 1 October 2016, no new / extended / renegotiated NAEDO mandates will be permitted in the early processing window;
- As from 1 July 2017, no new / extended / renegotiated AEDO mandates will be permitted in the early processing window;
- QED will have to be converted to AC to qualify for early processing after 30 June 2019;
- No participant offering the current AEDO and / or NAEDO solutions will be exempt from implementing the AC Solution;
- NAEDO mandates identified as QED will be allowed for processing in the early processing window until 30 June 2019;
- Stop Orders or standing orders are instructions from a customer to their bank to make regulator payments of a fixed amount to a named User. These are therefore authenticated and credit push instructions. For this reason, any participants who wish to process stop order in the AC processing window may choose to do so.
Further communication with regard to the launch and implementation of the AC system can be expected soon.
We are currently waiting to see if there will be any specification changes, before the final launch.
Authenticated Collections Communication #2, Nov 2015, Ref: 335129, PASA 2015.