Use Ach Direct Debit to Curb Customer Defaults - Companies Urged

By Kingsley Asare

Companies battling with customer defaults have been urged to use the Automated Clearing House (ACH) Direct Debit in order to reduce the incidence of defaults.

The Chief Executive Officer (CEO) of the Ghana Interbank Payment and Settlement Systems (GhiPSS), Archie Hesse, in an interview, said the ACH Direct Debit ensured automatic transfer of funds from the bank account of the customer to that of the company or service provider.

According to Mr Hesse, payment default was a major challenge for many companies, especially utility service providers, mortgage companies and lenders in general, and also affected expected inflows for insurance premiums, subscriptions and other recurring payments.

"While many companies have not found a way out, compelling them to sometimes use brute force, ACH Direct Debit could just provide some solutions. ACH Direct Debit is a simple, secure and reliable service that enables individuals, large and small organisations collect funds from bank accounts for their customers," he said.

He explained that all that was required was for the company to opt for Direct Debit as one of the payment channels for customers, adding that the company could then ask its customers to sign a mandate that would permit the company to authorise its banks to collect an agreed amount from the bank account of the customer on agreed date.

"Once the customer signs the mandate, he or she will only need to ensure that the account if funded such that the deductions and transfers can be effected. With Direct Debit, once the agreed time is due, money will be automatically deducted from the account of the customer and paid to the account of the company electronically," Archie said.

The GhiPSS CEO noted that Direct Debit had been effective in many advance countries and companies in Ghana could adopt it to ensure efficiency in collection of payments and entreated companies to use it to improve their revenue mobilisation.

He said Direct Debit was suitable for paying mortgages, utility bills, insurance premiums, loan re-payments, and rent and subscription base service payments.

Mr Hesse indicated that using Direct Debit for payment was beneficial to both the company and the customer and created convenience for the customers and also allowed them to plan and schedule their payments.

"Companies which adopt Direct Debit normally enjoy excellent cash flow benefits from receiving regular payments. They also have low cost administration compared with requesting consumer-initiated payments. Direct Debit also provides better accounting efficiency compared to post-dated cheques or walk-in cash payments," he said.

The ACH Direct Debit was introduced in Ghana by GhiPSS but offered through the banks.

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