Using AEDO, NAEDO or EFT debits to collect funds

In order to understand which debit order method to make use of you will first need to have an understanding of the differences in the three major collection methods: Authenticated Early Debit Order (AEDO), Non-authenticated Early Debit Order (NAEDO) and Electronic Funds Transfer (EFT).

EFT Service

Lets start with the oldest and most widely used method, EFT. The EFT Service is provided by numerous participating banks (eg. ABSA, FNB, Nedbank and Standard Bank), which enables companies to process payments entirely by computerised means. The service can be used both for collecting payments from clients (EFT debits) and for making payments (EFT credits). Payments can be made for salaries, creditors, wages etc. Your business can lodge payments and collections through their bank to all participating banks.

Transacting via the EFT service

Both debit and credits may be processed through the system.

The following criteria applies:

• Credits may be processed against current, savings and transmission accounts, and under certain circumstances, bonds, loans and subscription share accounts. Transactions greater or equal to R5 million rand will not be permitted and will be homed back with the reason that it exceeds industry imposed limits. Such transactions should be routed through the real time line and not the operator.
• Debits may be processed against current, certain savings and transmission accounts. Debits to bond and subscription share accounts are not allowed. A maximum value limit of R500,000 per transaction is in place.
• The breaking up or splitting of transactions to avoid limit restrictions are not permitted.

Coverage of the EFT service

The EFT service covers all types of accounts permitted by the EFT Service rules and which are held in the Common Monetary Area by participating banks. A list of participating banks can be obtained on application.

NAEDO Service

The NAEDO Service is provided by participating banks (eg. ABSA, FNB, Nedbank and Standard Bank), which enables companies and other bodies to process payments entirely by computerised means. The service can be used for collecting payments from clients (debits). NAEDO does not make provision for a credit facility and EFT credit will be used if required.

NAEDO payment instructions support multiple presentments thereof. If these are unpaid after the first presentment, credit tracking may be invoked. Credit tracking is optional and if selected, the unpaid NAEDO payment instruction will automatically be represented during the afternoon of the same business day and for the consecutive amount of days selected, twice a day, on business days until payment is received or until expiry of the tracking period selected.

All NAEDO payment instructions, are randomised giving all Users an equal opportunity of receiving payment and are processed as close as possible after salary credits are paid into the bank accounts of Customers in the early morning.

Transacting via the NAEDO service

Only debits may be processed through the system. The following criteria will apply:

• Debits may be processed against current, certain savings and transmission accounts. Debits to bond and subscription share accounts are not allowed.
• A maximum value limit of R5 000 per transaction is in place. The splitting of transactions to avoid the limit restrictions is not permitted.
• All NAEDO payment instructions must be uniquely identifiable by the Agreement Reference and payment cycle.

Coverage of the NAEDO service

The NAEDO service covers all types of accounts permitted by the NAEDO Service rules and which are held in the Common Monetary Area by participating banks. A list of participating banks can be obtained on application.

AEDO Service

The AEDO service is similar to NAEDO in all respects, but cannot be easily disputed as the transaction is initiated with the account holders card and pin. AEDO is an effective solution to mitigate collection risk and defaults on payment. Contact us if you are interested in the AEDO service.

Conclusion

Examples of where EFT and NAEDO services can be used is given in my previous article. The AEDO service may effectively be used for collection in any situation when NAEDO may have been utilized.

I will be exploring the legal requirements and implications of these three payment methods in a future article. If you wish to obtain an debit order quotation or for more information please visit our website at http://www.directdebit.co.za.