Direct Debit System


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Direct Debit System - Revolutionizing the Payment Landscape in the UAE.

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Direct Debit System

  1. 1. Direct Debit SystemRevolutionizing the Payment Landscape in the UAE
  2. 2. INDEX3 Preface4 Evolution of Payment Systems5 Direct Debit System6 Direct Debit Workflow7 Benefits of Direct Debit System8 UAE Direct Debit System (UAEDDS)9 UAEDDS Inward / Outward Direct Debit Cycles10 What is the Implication of the UAEDDS to Banks?11 Newgen Solution – Preparing Banks to Meet the UAEDDS Challenge12 Benefits of the Newgen Solution13 About Newgen14 Newgens Payment System Experience
  3. 3. Ensure peace of mind for yourcustomers and keep them for lifePrefaceA payment system comprises the sophisticated, technology driven Why Direct Debit System ?cultural, political, legal, economic and image-based/electronic modes ofbusiness practices and arrangements payment. A key development in this ! A simple, secure and convenientprevalent within an economy to process of evolution is theevaluate or exchange ownership of introduction of a system that shall be payment system ! Peace of mind for customers with nogoods and services. In its simplest form, referred to as the UAE Direct Debita payment either stems from a System (UAEDDS). The UAEDDS is overlooking of payment due datestransaction between buyers and sellers an initiative of the Central Bank of the ! Quick resolution of customersin a market, or from a financial UAE (CBUAE) to provide an queries and immediate refund forobligation. alternative method of effecting undue payments made recurring payment transactions for ! No need to issue a new mandateAn efficient payment system utility services such as telephone bills, each time the payment amountinfrastructure is necessary for the electricity bills, etc., reducing the need for issuing and handling paper changesfinancial stability and advancement of instruments. ! Elimination of cheques and theeconomic activities in an economy. Awell functioning payment system associated fraud riskensures reduced financial risks by Designed to operate on the basis of ! No more queuing at banks and cashincreasing reliability and speeding fully automated straight-through- offices to pay billssettlement of transactions. It further processing, the UAEDDS wouldfacilitates effective implementation of require manual intervention only inmonetary policy by underpinning its exceptional circumstances. Thetransmission mechanism. Central banks system depends upon mutual trustthus have strong incentives to between all participants, and promisesrestructure the payment system significant benefits for each.infrastructure and ensure its smoothfunctioning. This document will not only introduce you to the Direct Debit PaymentThe payment system infrastructure in System, but also discuss its impact onthe UAE has gradually evolved from the Consumers, Service Providers andtraditional cash and paper-based Banks.payment instruments to more3
  4. 4. As per the World Payments Report 2011, the global volume of noncash payments grew by 5 percent in 2009, to 260 billion transactionsEvolution of Payment SystemsThe first description of a form of decline in cheque use over the past the Federal Reserve Banks first movedpayment in the medieval world was decade. Cheques are a relatively high- currency via telegraph. However it wasobserved in the early eleventh century cost payment method compared to only after the automated clearing houseby an Iranian traveler named Nasir-i their electronic counterparts. (ACH) was setup by the US FederalKhosrau while visiting the city of Basra Moreover, as cheque use is declining Reserve, in 1972, that electronic(in present-day Iraq). There he many of the overheads remain, meaning payments became widespread.recorded a form of payment, known as that the unit cost of processing athe sakk, which was characterized as a cheque is increasing over time. While the payment trends clearly differmerchants written instruction ordering across geographies, the shift towardshis bank to make a payment from his Today, paper itself is seen as an electronic payments is global. Driven byaccount. This was more in the nature of inconvenience in the payment process. rapid technological advances and loweran instrument that came to be known as Just as paper money replaced precious costs, as well as the additionala “Bill of Exchange” and was a metals paving the way for the industrial convenience that they offer toconvenient form of payment between revolution, in the recent years clearing consumers and businesses, electroniclocal merchants. However, this laid the of payments has evolved from exchange modes of payment, such as Directfoundation for the development and of paper-based instruments to Debits, have gained momentum overprogression of the modern cheque. electronic exchanges, with clearing the past few years. times shortening correspondingly.While the cheque remained the mostpopular payment instrument for The advent of electronic money can bedecades, there has been a steady traced back to 1918, the year in which SOLUTIONS FOR BUSINESS PROCESS & CONTENT MANAGEMENT 4
  5. 5. Direct Debit SystemWhat is a Direct Debit ? What is a Direct Debit Authority ?Direct Debit is essentially a payment A Direct Debit Authority (DDA) is an care of all further payments. However,system allowing a customer to make instruction from a customer to his the payer receives advance notice ofregular payments (e.g. bills, bank authorizing a payee, such as a the bill amount, every time his accountinstallments, subscriptions ...etc) public utility, insurance company, etc., is debited.without having to visit the bank. Direct to collect varying amounts from hisDebits are used throughout the world account in settlement of outstandingand are acknowledged as one of the bills for goods or services provided.most cost effective and efficient Once the DDA has been signed, andmethods of processing regular and returned to the Originator, it is theperiodic payments. responsibility of the bank to takeKey Participants Originator The Originator or Payee, i.e. the organization (electricity, telephone, car leasing company etc.) that provides the goods or service Sponsoring Bank The Sponsoring Bank, where the Originator maintains its accounts Payer The Payer, i.e. the customer/service user who agrees to pay the bills using direct debit, and whose account is to be debited Paying Bank The Paying Bank, i.e. the bank holding the Payers account, which is to be debited Central Bank of UAE The Central Bank of the UAE (CBUAE), which is responsible for the governance of the scheme and the operation of the UAEDDS portal5 SOLUTIONS FOR BUSINESS PROCESS & CONTENT MANAGEMENT
  6. 6. Direct Debit Workflow 1 Invitation to make future payments using Direct Debit (DD) 5 Starts presenting PAYER/ direct debits to it’sCONSUMER bank account ORIGINATOR/ 2 SERVICE PROVIDER Fills in DD mandateform for direct debit authorization 4 Intimation of 6 direct debit DD instruction authority forwarded to payer’s bank SPONSORING BANK/ ORIGINATOR’S BANK 7 Bill amount debited from the payer’s account and credited PAYER’S BANK to the originator’s account 3 Sends completed DD mandate form SOLUTIONS FOR BUSINESS PROCESS & CONTENT MANAGEMENT 6
  7. 7. Benefits of Direct Debit System For Payers For Originators The Direct Debit System offers a simple, safe and The Direct Debit System offers both financial and convenient payment option, enabling customers to pay administrative benefits to the Originators: recurring bills as and when they fall due. The benefits to Payers include: ! Substantial reduction in the cost of collection, with no need for a detailed reconciliation process to check the ! No need to remember payment due dates receipt of payments ! No need to write cheques, locate drop boxes, or visit ! Originators can focus on unpaid direct debits – in other bank branches / cash offices words, they can manage by exception ! On time payments – no worries about services getting ! Elimination of significant paperwork and manual discontinued due to non-payment of bills, or late handoffs payment penalties (subject to funds being available in ! Reduced operational expenses such as front office the Payers account) administration, stationery and postage ! Any queries regarding undue amount debited are ! Greater predictability in cash flow resolved quickly by the Paying Bank, with immediate refunds where appropriate ! No need to sign a new mandate each time the amount changes (e.g. utility bills)With Direct Debits your customers will haveless worries and more time to themselves
  8. 8. The UAEDDS will act as a Nett Settlement System, with posting of a consolidated debit/credit once every business day at settlement timeUAE Direct Debit System (UAEDDS) UAEDDS Portal SOLUTIONS FOR BUSINESS PROCESS & CONTENT MANAGEMENT 8
  9. 9. UAEDDS Inward / Outward Direct Debit Cycles UAEDDS – Outward Direct Debit Cycle Validation checks on file format, originator master and DDA master Upload on UAEDDS Portal Reading pay/ Data Entry/Bulk file no-pay response upload of DD from Portal instructions by Originators and/ or Sponsoring Bank Return Memos Generation Credit Posting in CBS for Originators UAEDDS – Inward Direct Debit Cycle Validation checks on file format, originator master and DDA master Manual workstep for exception handling Reading DD files from UAEDDS Portal Upload on Automatic Financial UAEDDS Portal Verification with CBS Credit Posting in CBS Web Referral - Empowering RMs to take financial decision9 SOLUTIONS FOR BUSINESS PROCESS & CONTENT MANAGEMENT
  10. 10. What is the Implication of the UAEDDS to Banks?Introduction of the UAEDDS will cause the UAEDDS retaining mandatesimmense upheaval as banks realize the ! Notifying the Central Bank and the ! Answering queries or resolvingneed to assess the adaptability of their other participating banks of the complaints from customers inexisting legacy systems to the Originators identity as quoted in the respect of the Direct Debit Systemrequirements of the new payment mandate or individual Direct Debitsystem. Handling thousands or perhaps ! Notifying the Originator regarding any transactionsmillions of direct debit instructions on a unpaid Direct Debits ! Producing reports detailing all newmonthly basis is no easy task. Moreover, ! Processing appropriate refunds to the and cancelled mandatesbanks will need to prepare themselves Paying Bank immediatelyto address the increased financial and ! Ensuring that the Originators send the While the Direct Debit Systemadministrative risks associated with the completed mandates to the right represents a significant challenge fordirect debit instrument. destination in the Paying Banks banks, requiring them to upgrade their legacy systems to facilitate straight-Role of Sponsoring Bank through processing of Direct Debits, it Role of Paying Bank! Assessing prospective Originators for also presents an opportunity for banks. ! Accepting or declining Direct Debit admission to the Direct Debit scheme Faster, safer and easier payments would Authorities based on fulfillment of! Briefing prospective Originators fully certainly result in improved customer certain pre-defined criteria; The about the code of practice under the satisfaction and loyalty. Further, with no Paying bank may or may not provide UAEDDS more queues at branches for paying the customer with a reason for! Getting completed and maintaining bills, bank staff can focus on building rejecting a mandate the Originators Direct Debit relationships and generating revenues. ! Routing the Direct Debits to the right Agreement & Indemnity Banks that most successfully implement bank accounts! Ensuring that the Originators it the UAEDDS can certainly transform ! Verifying customer mandates for the direct debit payment instrument sponsors comply with the terms of completeness and accuracy, and into a significant revenue stream. Does your bank have a strategy in place to provide a compliant direct debit process?
  11. 11. Newgen Solution – Preparing Banks to Meet theUAEDDS ChallengeOver the past few years the payments Fund Transfer (EFT), mobile capture, (data entry / upload, data validation,landscape, across the globe, has been etc. exception highlighting, batch-making /experiencing a transition from paper- Newgens solution for Direct Debit totaling, compression and securebased modes of payment to faster & payments helps banks to automate upload etc.)more reliable electronic payment error-prone processes and efficiently ! Document & Recordssystems. To remain competitive it has manage EFTs while reducing their Management – To manage bothbecome imperative for banks to replace operational expenses. Further, the paper-based as well as electronictheir out-dated systems with new system can scale up as your business images and data for indexing, archival,payment systems that can help them expands, to accommodate your retrieval throughout its life-cycleadapt to constantly evolving business growing business requirements. ! Management, Monitoring &needs. Tracking – To monitor every step The Newgen solution is an integration under the EFT process for removingNewgen offers a complete suite of of following core software-based process bottle-necks; comprehensivepayment solutions (image and non- technologies: reporting and audit trails maintainedimage based), enabling banks to for “who-did-what-when”effortlessly migrate from legacy ! Workflow – To define the routes forpayment systems to Image-based incoming and outgoing direct debitsCheque Clearing (ICCS), ElectronicSolution Features Automatic receipt of Originator instructions, Ÿ Ÿ online interface provides real-time view Intuitive including registration and transaction of data processing Ÿ notification via multiple channels Payer Easy-to-use on-line interface for Originators Ÿ Complete range of workflow and case- Ÿ Exception handling, feedback, reporting and Ÿ management facilities billing Maintaining mandates Ÿ Automatic validation for UAEDDS rules and Ÿ Validation for UAEDDS rules and mandate Ÿ mandate compliance compliance Exception notification and reporting Ÿ Newgen has partnered with 50+ banks in the last 5 years to facilitate payments (EFT and ICCS)11
  12. 12. Benefits of the Newgen Solution! Straight-through processing ! Platform-independent! Thin client architecture + Application built on open standards! Browser-based access to all users + App servers: Websphere, JBOSS, Weblogic! Only server installation and updates; no installation on + Databases: Oracle 11g, SQL Server 2008 client side for patches or upgrades + OS: Windows Server 2008, Sun Solaris, AIX! Database access through web service ! Real-time integration with banking applications + Clients do not connect to database directly ! Audit trail on who did-what-when concept +Database security compliance ! Multi-currency/ multiple cycles support! Better response to customer queries ! Support for value capping through the EFT process Your customers no more need to worry about overlooking payment due dates
  13. 13. About NewgenNewgen Software Technologies Limited is a leading global provider of Business Process Management (BPM),Enterprise Content Management (ECM) and Customer Communication Management (CCM) with a globalfootprint of 900 installations in over 50 countries with large, mission-critical solutions deployed at the worldsleading Banks, Insurance firms, BPOs, Healthcare Organizations, Government, Telecom Companies & SharedService Centers.Newgen Software has been positioned in the Magic Quadrant for Business Process Management (BPM) andEnterprise Content Management (ECM). The company has been recognized by distinguished analyst firms likeFrost and Sullivan as A Hot Company to Watch for in their global ECM Market report, 2009 and by IDC in itsexclusive report “Newgen Software: Global Leader in Business Process Management and DocumentManagement Solutions”. Newgen is the winner of prestigious awards, such as the CNBC-TV18, “Emerging IndiaAward 2008”.Newgens Quality Systems are certified against ISO 9001:2008 and Information Security Standard, ISO27001:2005. Newgen has been assessed at CMMi Level3.13
  15. 15. CORPORATE OFFICE INTERNATIONAL OFFICESNew Delhi Kolkata UAENewgen Software Technologies Ltd. Newgen Software Technologies Limited Newgen Software TechnologiesA-6, Satsang Vihar Marg, Punarnava Complex , Room No. 505, 5th Floor Off No: 314, Building No: 3Qutab Institutional Area, 13, B.B Ganguly Street, Kolkata-700012 P O Box. 500297, Dubai Internet CityNew Delhi - 110 067 INDIA Tel: +91-33-65340498 Dubai, UAETel: +91-11-4077 0100, 2696 3571, 2696 4733 Telefax: +91-33-40037770 Tel: +971 44541365Fax: +91-11-2685 6936 E-mail: Fax: +971 44541364Email: Email: emea@newgensoft.comSALES & SUPPORT OFFICES Mumbai USBangalore Newgen Software Technologies Ltd. Newgen Software Inc.Newgen Software Technologies Ltd. B- Pitruchhaya, Paralkar Marg, 1364 Beverly Road, Suite 300FF-2, Alpine Arch, 10 Langford Road Off - Ranade Road, Shivaji Park, McLean, VA 22101Bangalore - 560 025 Dadar - West, Mumbai - 400 028 Tel: +1-703-749-2855Tel: +91-80-2223 7765, Telefax: +91-22-2444 6587-89 Tel: +1-703-439-0703 +91-80-2227 3614 Email: Email: usa@newgensoft.comTelefax: +91-80-2229 1615Email: New DelhiNewgen Software Technologies Limited Newgen Software Technologies Ltd.Ground Floor, Quanta ZEN E-44/13, Okhla Industrial Area Phase II38, Dr. Thomas Road, Off. South Boag Road New Delhi - 110 020T. Nagar, Chennai - 600 017 Tel: +91-11-4653 3200, 2638 4060, 2638 4146Tel: +91-44-4356 0890 Telefax: +91-11-2638 3963 +91-44-4356 0891 Email: +91-44-4356 0892Email: Software Technologies Ltd.304/2, 3rd Floor, Block-I, White House6-3-1192/1/1, Kundan BaghBegumpet, Hyderabad - 500 016Tel: +91-40-4456 5656, 2341 6857Fax: +91-40-4456 5666Email: SOLUTIONS FOR BUSINESS PROCESS & CONTENT MANAGEMENT