Albertus Mutonga Matongela
4 September 2008
This is the 7th article in a series of articles on payment systems in Namibia. The present article provides you with transfer payment instruments in the National Payment System. Happy reading.
A credit transfer is a payment initiated by a payer to a payee through a credit push electronic fund transfer mechanism. As you already know a payer is a person who pays or owes somebody money, while a payee is a person to whom a payment is made. A credit transfer is undertaken if there is a commitment between two persons. I want to give you an example here.
Let us assume you have a retired mother living in Ruacana and you make a commitment of sending her N$300 every month from your bank account. In this transaction you are the initiator of the transaction as a payer and your mother is a payee or beneficiary from the transaction.
There are other examples of credit transfers that you can think about. Are you a subscriber to Telecom Namibia telephone services? I suppose many of you are, especially if you have a landline at home. Normally what happens is that you get a statement or invoice from Telecom Namibia, which says that you have to pay for services rendered by the end of the month.
If you are like other people I guess you normally pay your bills through Internet banking or mobile banking. What you always do really is to push funds from your account, using the Internet or mobile phone, to Telecom Namibia's account at a particular banking institution. This is a typical credit transfer.
Maybe you are an employer located in Windhoek having three workers at your communal farm in the Caprivi Region. You specify in the employment agreements with your employees that you will be paying them their salaries by the 25th of each month through Internet banking. This situation avoids a situation where you have to travel to Caprivi Region just to go and pay your employees. This is also an example of a credit transfer.
The above shows that there are examples of credit transfers irrespective whether it is a payment from one to many, or from many to one. Examples of credit transfers are salary payments, bill payments, recurring payments and other payments.
A debit transfer is similar to a credit transfer. There is a slight difference though. To help you understand a debit transfer, I will make assumptions and give you examples. Let us assume you have insurance for your car and for your legal costs. Normally people insure themselves because of certain dangers that can befall them in their lives. You can be involved in an accident or you can be sued for one thing or the other.
At times the losses that result when a car is involved in an accident or legal costs that can befall you are very high, which makes it important for you to have necessary insurance. So, car insurance and short-term legal insurance premiums can be paid for monthly through a debit transfer.
What then is a debit transfer? Essentially with a debit transfer you instruct a payee to deduct a certain amount from your bank account with your banking institution. It is a payee who initiates the transaction. Let me go back to our example of car insurance. Do you still remember the last time you took up insurance for your car? Let us assume you did. You filled in insurance forms with your insurer or broker.
As part of the insurance agreement your insurer or broker required you to complete your banking details in certain part of the forms. You also indicated to the insurer or broker when during a month your account would be debited with the premium. Probably the agreement was that your bank account should be debited on the 28th of each month.
This agreement is nothing else but a debit transfer because you instructed your insurer or broker that come the 28th of each month your bank account should be deducted with say N$250.
But what do I mean when I say the payee initiates a transaction in a debit transfer mechanism?
Refer to the car insurance example again. Once you have signed your car insurance forms, your insurer will present your instruction to your banking institution demanding payment on the 28th of each month.
Obviously, your banking institution will do certain due diligence procedures before authorizing the payment, like comparing your signature with your banking institution and the one with your insurer or broker.
If the signatures tally then a payment is authorized and next time you check your bank account details you will see the insurance premium having been deducted from your account.
From the foregoing you can easily deduce that debit transfers are common in Namibia. They have been in use for some time now.
Ask people who have a business relationship say with Virgin Active for physical fitness, Santam for car insurance, Legal Shield for legal insurance, Old Mutual for life policy - they will definitely tell you that they pay their premiums through a debit transfer.
I must say a debit transfer, just like a credit transfer, is a good form of electronic payment in the sense that it helps you avoid standing in a queue at your service provider each time your premium is due. Time is hardly enough and nowadays it runs fast due to many things we do every day.
So to help you save your time and attend to some of your other needs a debit transfer is one of those payment instruments worthy of consideration.
I must also say that a debit transfer is one of the cheapest ways of electronic payments. This is under normal circumstances. Under abnormal circumstances things might be different. Make sure that there are sufficient funds in your account to cover a debit transfer.
You will notice how expensive it is if a transaction bounces from your account. This can be painful but I believe it teaches us as consumers of financial services to be responsible in our dealings with the service providers and banking institutions.
In the next article we will cover smart card in the National Payment System in Namibia.
Albertus Mutonga Matongela is an economic and payments analyst based in Windhoek. Opinions in this article are his own and should not be associated to his employer or this paper.
Be the first to Write a Comment!
Copyright © 2008 New Era. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
