On Black Friday you may feel inclined to part with your money as fast as you possibly can in order to snap up enticing deals.
The South African Reserve Bank (SARB) has urged customers to proceed with caution and issued a warning about the potential pitfalls of "instant EFTs".
As the name suggests, instant EFT is a faster version of the standard electronic fund transfer (EFT) payment method and a number of e-commerce platforms in South Africa have begun offering this method as an alternative to card-based payments, under the guise of convenience.
It is more convenient, but as is so often the case, convenience comes at a price and it may be more than you bargained for.
How Instant EFTs work
Instant EFTs are made possible through a process called 'screen-scraping', which requires you to provide your internet banking credentials to a third party.
The third party then 'scrapes your screen' to perform the EFT on your behalf, and then validate that the payment has gone through to the retailer. How nice.
The SARB released an infographic that illustrates the process:
The risks of instant EFT
The South African Reserve Bank, the Financial Sector Conduct Authority (FCSA) and the Payment Association of South Africa (PASA) – which is basically the entire payments industry – have stated that they do not support the use of screen scraping to process payments, as it exposes you, the consumer, to a number of risks.
– breaches of data privacy;
– breaches of contractual agreements (with banks);
– financial loss and purchased goods loss.
When you give a third party access to your internet banking credentials you lose control of those credentials – your account number and statements can be stored without your knowledge or consent. You also have no idea how your personal data will be managed.
Online fraudsters may also be posing as instant EFT providers, or an e-commerce platform, with the sole intention of extracting your online banking details from you.
In the event of a scam, when you willingly give your banking details to a third party you may unwittingly be in breach of your bank's terms and conditions and thereby forfeit any legal protection if you suffer any financial loss.
The payments industry wants you to know that instant EFTs are permanent and irreversible. If an e-commerce platform does not honour the agreement you will be unable to lodge a complaint or reverse the transaction.
Tips for consumers
Electronic payments are becoming ubiquitous and its popularity is leading to an increase in online crimes. Therefore, it is important for consumers to educate themselves on the risks and benefits of paying for goods and services via the internet.
It is becoming more and more difficult for regulators and the financial industry to keep up with these crimes and mitigate losses.
To protect yourself you should employ the following practices:
– Be extra vigilant. Err on the side of caution and consult your bank before you go through with a transaction, especially if it seems too convenient.
– Use industry-supported solutions, like your debit or credit card. If you are wary of card payments, several banks have introduced virtual cards, which add another layer of security.
– Finally, do not share your internet banking login details with any third party.