Post-dated cheques are a common form of payment in the UAE, whether buying a car, paying rent, school fees etc. They are a last-ditch effort by the creditor-recipient to guarantee that the issuer of the cheque will pay on a date certain in the future. This situation represents a risk to the cheque recipient, as the passage of time may result in there being no cash left in the issuer’s bank account to be used to pay the amount listed on the cheque when it is eventually presented to the bank for payment.
Today, there is a misplaced perception of security in that bouncing a cheque is treated as a criminal offence with the potential of jail time, hefty fines, and an overall risk to the persons credit score.
Prior to 2017 the law provided a blunt, but effective way for landlords/creditors to pressure tenants/debtors into repayment. When threatened with the possibility of jail, tenants/debtors usually find a way to quickly pay their debts. However, Penal Law No. 1 of 2017 reduces the likelihood of imprisonment for writing dis-honoured post-dated cheques. Dis-honoured post-dated cheques up to AED 200,000 are now considered “minor disputes”, and the 2017 Law greatly reduces the threat of detention or imprisonment for failure to honour a post-date cheque in Dubai. Once the fine is paid, the criminal claim against the tenant/debtor drawer of the cheque is dismissed, and the landlord/creditor must resort to a civil claim in the Dubai courts or other tribunal with jurisdiction over the transaction, to recover the amount of the bounced cheque. As the drawer does not face confinement for their actions, this diminishes the value of post-dated cheques as an effective form of security considerably.
These changes to the law bring Dubai in line with global financial practices whereby bouncing a cheque for relatively small amounts is no longer a criminal offense.
Payers are rapidly adapting to the “new normality” we live in today – not only with regards to changing health and wellbeing behaviours but also with what they expect from their landlords; management companies; schools; and their recurring Biller companies. These Biller companies are now prioritising and driving direct debit and digital payments to meet the increasing demand for remote/online and mobile solutions by their tenants and customers.
Today, we see landlords and management companies struggle with recent cost spikes, time-consuming payment management systems while still having to chase rents and provide a quality service to retain their clients. The smaller and more frequent amounts of rental payments via direct debit means landlords and management companies have the assurance of a stable income stream, significantly improved cash flow, reduced costs; less overheads, frees up time and removes reconciliation headaches for everyone involved. Zink Pay eliminates the need to chase payments, removes the headache of knowing if tenants have paid the rent, allows multiple tenancy rent collection and completely removes the sheer time spent on reconciling every month.
Tenants see the convenience and simplicity of direct debits as their rental payments automatically leave their account on a set date eliminating the chance of forgetting to send a cheque or the inconvenience of paying in person. Zink Pay offers instant notifications of payment dates and reminders with its app. Benefits for tenants are apparent and can even save them money, by never paying late and avoiding incurred charges. As with other regular outgoings, setting up a direct debit for rent makes enormous sense. Offering integrated direct debit payments provides simplicity to the tenant.
Schools, leasing companies, insurance companies and other companies with recurring payments/invoicing can also benefits from streamlining payments/invoicing through Zink Pay by increased profitability, as operational costs are reduced; certainty and control over payments, allowing for improved cash forecasting; simple reconciliation; and a more efficient payer management system.
We believe that this “new normal” and the unprecedented time we live in today will accelerate and move companies and people to utilise direct debit and all forms of digital financial services. Zink Pay is the next normal for direct debits and digital financial services in the UAE.