Banks’ direct debit transactions woeful
Direct debit transactions within the banking sector has suffered setbacks following a large level of dishonoured transactions.
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Out of 692,615 of direct debit transactions processed in the country, only 208,762 representing 30 per cent, were successful, a report by the Ghana Interbank Payment and Settlement System (GhIPSS), has revealed.
According to GhIPSS, which is facilitating the automated clearing house system in the country within the banking industry, the high volume of returns, representing about 70 per cent in 2015, was a result of insufficient funds, invalid accounts and mandate not received, therefore, payments were stopped.
A direct debit payment, which occurs within the automated clearing house (ACH) platform introduced by GhIPSS, is an instruction from a customer to their bank or savings and loans company authorising an organisation to collect varying amounts from their account.
It is also a pull transactions which is used for recurring payments such as mortgage, utility bills, insurance premiums, loan re-payments, rent, subscription based service payment among other things.
While ACH Direct Credit service introduced in 2011, facilitates interbank disbursement of funds, the ACH Direct Debit interbank service introduced in 2012 facilitates the collection of funds from other banks.
Prior to the introduction ACH Direct Debit interbank service, the norm was for the institutions to open and maintain accounts with multiple banks. Collections were then effected within the respective banks (intra-bank).
The success rate on the ACH direct credit was however impressive beome only two per cent (74,406) out of 4.7 million transactions were denied.
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According to the President of Ghana Bankers Clearing House Association, Mr Isaac Kofi Amoah, the figures indicate that payment through direct credit remained the most widely used medium of exchange and mode of payment in the country.
“Consumers were patronising the direct credit payment platform than services from the direct debit and hence there is the need to create an awareness of the direct debit platform,” Mr Amoah told the Graphic Business on the sidelines of a stakeholder’s forum in Accra. GhIPSS organised the forum to provide the status report and discuss ways of improving on the gains.
Benefit of direct debit
Mr Amoah said the direct debit platform if fully embraced by stakeholders would provide enormous benefit to the government, businesses and individuals in the country.
“This platform if embraced would ensure better planning and projections due to guaranteed payments for the government, businesses and consumers,” he added.
The ACH direct debit data serves as a good way of tracking general income and expenditure patterns as well as increasing revenue of the government.
Governor commends direct debit initiative
The Governor of the Bank of Ghana (BoG), Dr Henry Kofi Wampah, said the direct debit service was a programme that needed to be nurtured to grow and flourish in the country.
“The direct debit if well promoted, promises to provide convenience and certainty to the payment landscape for the government, businesses and individuals,” he said.
In the 2015, edition of the World Payment Report direct debit was identified as one of the rapidly growing non-cash payment alternatives globally for the payment of utility, insurance premium payment, and tax payment.
Dr wampah said although the programme was going through developmental stages with setbacks, the global growth should be made to reflect in the country.
Challenges
The Chief Executive of Stanbic Bank Ghana, Mr Alhassan Andani, in an keynote address, said the ACH offered the solution to some of the challenges the country’s financial sector had faced in terms of treating recurring payments.
“Recurrent payments within the Ghanaian banking sector have evolved over the years from cash through cheques to standing order instructions with all their inherent challenges,” he said.
Those challenges, he said, had led to the development of more efficient electronic means of payments and collections such as direct debits.
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“Globally, the solution remains a critical means of collections. While the advanced economies are raking in upwards US$11 billion every year, African story has not been rosy with just about US$1.2 billion in collection per annum,” he noted.
He said the growth of the service has, however, been hampered by the tradition of cheque usage, low level automation and other factors such as low collection rates, irregular mandates, system challenges and limited understanding of the opportunities as well as the benefits available to users. GB