Nigerian fintech company, Paystack, has joined forces with the Nigeria Inter-Bank Settlement System (NIBSS) to introduce Paystack Direct Debit. This new digital tool allows businesses in Nigeria to securely withdraw funds from customers’ bank accounts.
According to Paystack’s product managers, Osaro Aiwekhoe and Yinka Adewuyi, this innovation was developed in response to the needs of businesses that regularly collect payments from customers.
With Paystack Direct Debit, users can now make automatic payments for subscriptions like Spotify and Netflix without using a debit card. Over 20 Nigerian banks are already integrated into this solution.
Traditionally, Direct Debit in Nigeria was managed through “Debit Notes” in paper format, facilitated by the payer’s bank and the Nigeria Clearing House infrastructure.
The Automated Clearing House, established in 2002, introduced the Nigerian Electronic Funds Transfer (NEFT). NIBSS, which oversees the physical infrastructure for clearing, incorporated Direct Debit into the Nigerian Clearing System in January 2006.
Here’s how Paystack Direct Debit works for merchants and consumers:
1. Ask your customer to link their bank account to your business.
2. For confirmation, the customer transfers a small amount to a bank account number provided by NIBSS.
3. Once the bank transfer is verified, a mandate is established, connecting the customer’s bank account to your business. This empowers you to initiate both one-time and recurring payments through Paystack, based on the agreed-upon terms with the customer.