SUMMARY
Apple asks India-centric consumers to maintain Apple ID balance for recurring payments, citing RBI’s notification
According to the RBI directive, w.e.f. October 1, 2021, an issuer will have to send a pre-transaction notification to the subscribers seeking approval for all recurring payments while AFA for transactions over INR 5,000
Hyperlocal platforms such as BBdaily (Bigbasket) and Freshtohome have been using wallet-based payments for subscription-based transactions
While banks, payments aggregators, card networks and payment gateways are still working to modify their modes of payments to comply with the new rules, Apple is meanwhile promoting wallet payments for subscription-based payments in India.
The US giant, in a notification to its India-based users has stated that card-based recurring payments may be declined by banks and card issuers and therefore it has asked users to instead add funds to their Apple ID balance that will enable auto-debit for subscriptions until the balance depletes.
In August 2019, the Reserve Bank of India came up with a framework for e-mandate-based recurring transactions. According to the RBI directive, an issuer shall send a pre-transaction notification to the cardholder at least 24 hours before the actual charge/debit happens as a risk mitigation and customer facilitation measure.
As per the new rules, the cardholder can opt-out of that particular transaction or the e-mandate after receiving the pre-transaction notification. Thus, a subscriber will have the time to withdraw the e-mandate every time an issuer raises an invoice for the recurring transaction.
An additional factor of authentication (AFA) validation is also required for a transaction exceeding INR 5,000.
Is Wallet Based Payments An Alternative To The Card-Based Recurring Payments?
A number of hyperlocal apps such as BBDaily and Freshtohome have been using only wallet-based recurring payments. The payment gets deducted from the wallet on a daily basis. However, these amounts have been significantly lower and give customers the choice to amend their subscriptions in advance.
Is this also going to be another popular alternative along with UPI-based auto-debit payments? Speaking to Inc42, Rai Rohit Prasad, cofounder and MD of payments aggregator startup Easebuzz said wallet is one alternative where the customer can go and deposit money and then the subscription amount gets debited, but the UPI-based auto-debit is a more effective payment system.
The benefit of UPI-based auto-pay is that the customer does not have to take the effort to go and deposit that money, it gets directly debited from the savings account of the customer.
Further, he highlighted that in the case of international companies like Apple where payments may get rerouted, wallet format can be seen as a quick-fix solution, it may not be a popular narrative because of the poor user experience it provides to the consumers.
For wallet-based payments, customers will have to maintain different wallets for different recurring payments and they will have to pay in advance. And, most of the wallet companies barring Paytm are offering either closed-loop or semi closed-loop wallets, and thereby are offering limited choices to their customers.
