South Africa’s Debit Order Fraud Problem 

For years, the South African retail banking sector has been plagued by debit order fraud. Also known as R99 scams, they are typically debit orders of less than R100 billed monthly without the account holder’s consent.  

Debit order fraud had become a serious issue in South Africa. According to a 2019 statement from the South African Banking Risk Information Centre (SABRIC), over 1.5 million debit orders were disputed per month, of which roughly 150,000 are genuinely fraudulent. Furthermore, a 2019 joint probe by SARS, the Hawks and the SAPS into the entire South African financial industry revealed that fraudulent debit orders were totalling at least R1.6 billion a year. 

Revolutionizing Transactional Verification   

The DebiCheck system was built from scratch over roughly six years and cost more than R5 billion to engineer – the biggest single payment project in South Africa. When it was activated by the South African Reserve Bank on the 1st of May, 2021, it became the first system of its kind in the world. 

DebiCheck’s full name is the AC/DebiCheck system. AC stands for Authenticated Collections system, which is a type of debit order that allows the user to confirm the details of a contract with their bank before the debit order is processed. 

The AC/DebiCheck system replaced the old Early Debit Order (EDO) system. Under the EDO system, consumers provided a mandate to a company or other user to collect money from their account – a system that was vulnerable to widespread abuse and fraud.

How Does the DebiCheck Mandate Work? 

Under the new AC/DebiCheck system, this mandate to withdraw funds from an individual’s account is now given to the bank (instead of a business). The bank is then responsible for releasing funds when a valid debit order is submitted by a company or individual. 

Crucially, the new AC/DebiCheck system allows the consumer to personally approve the debit order with their bank before it is debited. Once it has received validation from the account holder, the bank confirms the exact details of a debit order and constantly checks that it adheres to the agreed-upon contract. According to the South African Reserve Bank, the new AC/DebiCheck system eliminates the potential for debit order fraud. 

How Fraud and Financial Crime Sow Distrust 

In South Africa during 2020, of the roughly 55 million debit orders that were submitted monthly, 1.5 million of them (2.7%) were contested, while 150,000 (0.27%) were genuinely fraudulent. This 10:1 ratio of contested debit orders to fraudulent debit orders represents how deeply mistrustful South African consumers have become of their transactions.

This statistic reflects the widespread decay of trust across South African society. Of all South African respondents to a survey by PwC, 1/3 cited distrust as being the most significant emotional impact of economic crime.  

South Africa’s issue of pervasive fraud also has created a culture of mistrust and finger-pointing. Of those organizations that had reported experiencing economic crime, nearly one in five South African respondents cited that they had also been accused of committing an economic crime. 

Shockingly, when assessing the likelihood of who would point the finger in the case of an accusation, 44% were competitors, 43% were employees, and 31% were customers. Only in a quarter of incidents did a regulator make the accusation. This growing culture of finger-pointing highlights the damaging effects that distrust (caused by economic crime) has on an economy. 

Fostering Trust with Identity Verification and Enhanced Due Diligence

Although the damage from this mistrust is clear, it is naïve to simply ask people to trust one another. The risk of loss is too high. Trust must be rebuilt on verifiable identities that can offer peace of mind by affirming the integrity of those we do business with. 

As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, book a demonstration by contacting our team here.