Finteq Mandate System
The Finteq Mandate System (FMS) is designed to resolve inefficiencies in validation and management of the mandates required for the direct debit process. Direct debit transactions allow suppliers to collect funds directly from customer accounts through the banking system. This process requires a valid mandate as proof that the customer has agreed to this transaction, so funds are not debited by their bank in error.
WHAT IS THE FINTEQ MANDATE SYSTEM?
Currently, the validation of direct debit transactions is managed by the Collecting Bank. The FMS creates an opportunity for other stakeholders in the process to take on an active role in the validation and control of mandates and direct debit processes.
The FMS provides the means to validate direct debit transactions against authorised mandates through a unique mandate reference number. Suppliers, or operators at the stakeholder, will register and authenticate suppliers allowing them to perform mandate actions. Once suppliers are registered and/or mandates are loaded, validation is possible.
FMS held at the ACH
FMS provides access to suppliers to load, amend and delete direct debit transaction mandates. During the process of loading and amending mandates, the FMS sends a notification via SMS to the debtor customer and will require a response for these mandate additions or changes to be executed successfully. The Debtor Bank will also be provided with access to cancel a mandate if required by the debtor customer. Through these processes the FMS provides the participant banks with a level of control over the process in which their customers are involved. Once the mandate has been loaded, the FMS provides the means to validate direct debit transactions against authorised mandates through the unique mandate reference number. This unique reference number is generated once a mandate is successfully loaded on the FMS and is matched with an incoming direct debit transaction that contains the same unique reference in the message structure.
A mandate system at the clearing house offers several benefits:
- It distributes the responsibility of managing mandates beyond the Collecting Bank.
- It provides the Debtor Bank with a greater degree of control in the direct debit process.
- It enables mandate validation by the supplier and debtor customer via Finteq Mandate System (FMS).
A mandate system at the clearing house helps to mitigate several risks, including:
- Reduced risk of direct debit transaction abuse by rogue suppliers, as they are unable to submit transactions easily.
- Reduced risk of customer disputes as mandates are validated upfront by customers.
FMS held at the Collecting Bank
The FMS provides access to suppliers to load, amend and delete direct debit transaction mandates. The Debtor Bank is not able to interface with the FMS and will not be provided with access to cancel a mandate if required by the debtor customer. The FMS provides the means to validate direct debit transactions against authorised mandates through a unique mandate reference number. This validation step aims to stop transactions with invalid mandates from reaching the ACH and the Debtor Bank. This validation step will also highlight which suppliers to manage if they continuously send direct debit transactions with invalid mandates.
A mandate system at the Collecting Bank offers several benefits, including:
- Validation of the mandate before the transaction is sent to the ACH.
- Dual validation of the mandate, both during loading and when the transaction is being sent, ensuring that invalid mandates are identified and eliminated before they reach the ACH.
- Identification of suppliers that consistently submit transactions with invalid mandates.
FMS at the Collecting Bank helps to mitigate several risks, including:
- Reduced risk of direct debit transaction abuse.
- Reduced risk of customer disputes
FMS held at the Debtor Bank
In this model, the FMS cannot easily provide access to suppliers to load, amend and delete direct debit transaction mandates. Instead, the FMS provides access to the debtor customer or an operator at the Debtor Bank to load, amend and delete direct debit transaction mandates. The FMS provides the means to validate direct debit transactions against authorised mandates through a unique mandate reference number. Transactions are then validated when received from the ACH. If a mandate has not been loaded by a customer, the direct debit transaction is processed as a transaction with an invalid mandate. The Debtor Bank then has sight of which transactions may hold a higher risk of customer dispute. This process within the FMS provides the participant banks with a level of control over the process in which their customers are involved.
A mandate system at the Debtor Bank offers several benefits, including:
- Providing the Debtor Bank with a higher level of control in the direct debit process.
- Validating the mandate through Finteq Mandate System (FMS) by the debtor customer.
- Enabling the monitoring of direct debit transactions that have not been confirmed as valid by the customer monitored.
FMS at the Debtor Bank helps to mitigate several risks, including:
- Reduced risk of direct debit transaction abuse.
- Reduced risk of customer disputes.
- Reduced reputational risk for the Debtor Bank.
KEY Features
- Supplier Management
- Open API for Mandate Actions (Automated)
- Front-End System Access for Mandate Actions (Manual)
- Digital Mandate Records
- Mandate Validation
With the FMS in place, the Debtor Bank in the direct debit process will have lowered the risk of us-on-us disputes to near zero and will have oversight of mandates loaded by customers for other Collecting Banks, allowing them to monitor their risk of disputes proactively. In the direct debit process, the Collecting Bank and the Debtor Bank can be one single participant. In this case the bank sends and receives the direct debit transaction and debits the debtor customer. If the FMS is held by that bank, the benefits of the Collecting Bank and the Debtor Bank will apply to us-on-us transactions and the customers involved. The FMS at the bank will be able to manage suppliers and their mandates whilst validating the mandates with their customers. This ensures that the risk of us-on-us direct debits with invalid mandates and the correlating disputes is lowered to near zero.
