Technical Overdraft

An overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero. In this situation, the account is said to be "overdrawn".
If there is a prior agreement with the account provider for an Authorised Overdraft, and the amount overdrawn is within the authorised overdraft limit, then interest is normally charged at the agreed rate.
If the negative balance exceeds the agreed-upon terms, then additional fees may be charged and higher interest rates may apply; this is generally recognized as a Technical or Unauthorised Overdraft.

Example:
Given a client who has a current account which has Authorised Overdraft enabled and the client's total balance is < total balance > with an overdraft limit of < overdraft limit >

When withdrawing < amount > via < card settlement type >

Then the result of the withdrawal operation will be < execution result > and the resulting account will have the following balances: available balance, < expected available balance >, and technical overdraft amount, < technical overdraft amount >.

Replace the <> with the example results below:

Technical Overdraft Interest Rate

For the initial phase, the Authorised Overdraft settings are applied for Technical Overdraft as well as for Current Account type of products. If no authorised overdraft interest is set (or authorised overdraft is not enabled on the current account), then no interest will be applied for technical overdraft amounts.

Mambu will allow setting up a different interest rate for Technical Overdraft in a future phase, please follow our future release updates.

Repayments and Technical Overdraft

When the client makes a deposit, the Technical Overdraft due amounts will be repaid first, before Authorised Overdraft, Fees and so on. See below the balances order over which Mambu will apply deposits:

Reversing a transaction, or backdating a credit that covers technical overdraft amounts, is allowed when the original instruction of "Advice=True" was submitted. This means that if the account re-enters a Technical Overdraft state or it has hold or locked (guaranteed) balances, these conditions will be honoured under such scenarios. See below examples:

Example 1: Customer wishes to pay back some or all of the oustanding Technical Overdraft Balance, backdating that deposit, where the Advice=True on the original card settlement.

Given we have an account with:

• Overdraft limit = 500
• Authorised Overdraft amount due = 500
• Technical Overdraft amount due = 1000

Transaction 1: 1/1 - Card Advice Transaction of 1000 is posted. Available Balance = -1000
Transaction 2: 3/1 - Deposit of of 1500 is posted. Available Balance = 500
Transaction 3: 10/1 - Backdate a Deposit of 300 with a Valuedate of 2/1.

When Transaction 3 is posted, Transaction 2 is adjusted, and the Available Balance equals -1000, i.e. 500 minus 1500 (Transaction 2 adjusted) before being reapplied. This means that the account is taken back into a Technical Overdraft balance prior to the reapplication of Transaction 3. This is allowed, as it respects the fact that Transaction 1 was posted with Advice=True.

Example 2: Customer wishes to pay back some or all of the oustanding Technical Overdraft Balance, backdating that deposit, where the Advice=True on the original card hold.

Given we have an account with:

• Overdraft limit = 0
• Technical Overdraft amount due = 0

Transaction 1: 1/1 - Deposit of 100 is posted. Available Balance = 100
Transaction 2: 3/1 - Deposit of 100 is posted. Available Balance = 200
Transaction 3: 5/1 - Card Hold, with Advice=True, is posted of of 100.01 is posted. Available Balance = 99.99
Transaction 4: 10/1 - Backdate a Deposit of 5 with a ValueDate of 2/1.

When Transaction 3 is posted, the Available Balance equals -0.01, i.e. 100 minus hold of 100.01. Ordinarily this would not be allowed at the Hold Balance is greater than the Available balance. But due to the fact that the Hold was posted with Advice=True, it will be respected, and the validation will allow Transaction 4 to be posted.

How is Technical Overdraft impacted, if the Authorised Overdraft limit is increased?

Mambu will redistribute the Technical Overdraft amount due if the Authorised Overdraft limit is increased.

As such, if the Authorised Overdraft limit is increased high enough, the Technical Overdraft amount due may become 0. For example, if an account with an Authorised Overdraft limit of 100, which is used up, and a Technical Overdraft amount due of 200 has its Authorised Overdraft limit raised to 400, then the Technical Overdraft amount due will become 0 and the Authorised Overdraft amount due will be 300.

Account Impact

Mambu allows the retrieval of information related to Technical Overdraft at account level, just as we do for Authorised Overdraft. Retrievable information:

• Interest Rate
• Interest Accrued
• Amount Due
• Interest Due

The Technical Overdraft amount will also be stored at transaction level, as part of the transaction details, and will also be taken into account when writing off a deposit account with overdrawn amounts.