Retentions

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Index

It’s important to understand that Debit Order processing naturally carries a level of financial risk. Transactions may be returned unpaid for reasons such as insufficient funds, customer disputes, or, in rare cases, fraudulent activity. For this reason, all financial institutions involved in Debit Order processing require security measures to help manage and mitigate this risk.

In traditional banking environments, this risk is typically covered by a cash deposit, usually calculated at around 10% of the total monthly value of transactions processed.

For example, if a client processes R100 000 in Debit Orders during a month, they may be required to secure this activity with a deposit of between 50% and 100% of the monthly total. The exact percentage depends on the client’s risk profile. New businesses, or businesses without an established financial or processing track record, are generally required to provide 100% security of their monthly aggregate value.

Netcash takes a more practical and flexible approach to managing this required security. Instead of a once‑off deposit, Netcash applies a retention‑based model. Depending on the retention option selected, up to two amounts may be retained from each batch processed.

These amounts are known as Security Retention and Unpaid Retention, and they are designed to help manage risk while allowing your Debit Order collections to continue operating smoothly. Each of these retention types is explained in more detail below

Security Retentions

Security Retention is the portion of each batch that is held back to provide the required security to the banks against the value of your Debit Orders. In simple terms, it acts as a minimum liquidity buffer that Netcash must maintain with our banking partners in order to continue processing Debit Orders smoothly.

This retention also serves as additional protection for any Debit Orders that may be returned late and are not fully covered by your Unpaid Retention.

For most clients, Security Retention is set at 10% of the value of each batch processed and is retained on every batch. After 22 working days, any portion of this retained amount that has not been required for returns is automatically released and becomes part of the available balance on your Netcash account.

Special Considerations for Sole Proprietors

Where the legal entity is a sole proprietor, the standard 10% Security Retention does not apply initially. Instead, for the first three months from the commencement date, Netcash will retain 100% of the value of each batch processed. This allows time to establish a processing history and manage risk during the early stages of trading.

After 22 working days, any remaining retained amount will be added to your available balance and can be released to your bank account. Once the initial three‑month period has passed, Netcash may consider reducing the 100% Security Retention to 20%. This reduction is assessed on a case‑by‑case basis and depends on several factors, including processing behaviour and overall risk profile. Please note that the decision to adjust the Security Retention rests entirely with Netcash’s operations department.

Unpaid Retentions

Unpaid Retention is the portion of a batch that is held back specifically to cover any Debit Orders that may be returned unpaid. The retention percentage is calculated based on the average unpaid or returned transactions over the past six months, ensuring that the amount retained closely reflects your recent collection performance.

If the total value of unpaid transactions in a batch is less than the amount retained, any remaining balance will be released after 22 working days and added to the available balance on your Netcash account.

In cases where the value of unpaid transactions exceeds the retained amount, the additional unpaid value is covered using the Security Retention held on the batch. This layered approach helps ensure that all returns are managed smoothly without unnecessary disruption.

Because there is no transaction history available for the first batch, the Unpaid Retention for that initial batch is applied at a standard rate of 10%. Thereafter, as your account builds a processing history, the Unpaid Retention is recalculated and adjusted based on your actual unpaid performance over time.

This approach allows Unpaid Retentions to become more accurate and balanced as your Debit Order activity matures, offering a fair and practical way to manage returns.

The unpaid and security retention including the release dates can be viewed on your Debit Order batch reports_ download XLS option for all additional fields related to retentions