RBI Allows UPI Users To Bypass Additional Factor Authentication

To facilitate small digital payments, the Reserve Bank of India (RBI) has announced to allow consumers to give an e-mandate for recurring payments made through Unified Payments Interface (UPI).

In August 2019, the RBI had said that it had been receiving requests from industry stakeholders to allow processing of e-mandate on cards for recurring transactions with Additional Factor of Authentication (AFA) during e-mandate registration and first transaction, and simple/automatic subsequent successive transactions. It also added that keeping in view the changing payment needs and the requirement to balance the safety and security of card transactions with customer convenience, it has been decided to permit processing of the same.

The central bank has now extended the same to cover UPI transactions as well. “On a review of the developments since this facilitation, it has been decided to extend the above instructions to cover UPI transactions as well. All the instructions/conditions outlined in the circular under reference would apply, mutatis mutandis, while processing e-mandate in UPI,” the RBI said in a statement.

During the registration process, the cardholder shall be given an option to provide the e-mandate for either a pre-specified fixed value of a recurring transaction or for a variable value of the recurring transaction. In the case of the latter, the cardholder shall clearly specify the maximum value of recurring transactions, subject to the overall cap fixed by the RBI, which is currently INR 2,000 per transaction.

With this, the UPI users can bypass AFA every time a regular payment is made by giving a one-time instruction to the UPI service provider. This comes as part of RBI’s proposal in November 2019 to promote digital payments. Digital payments constituted 96% of total non-cash retail payments during the period of October 2018 to September 2019.

“During the same period, the National Electronic Funds Transfer (NEFT) and UPI systems handled 252 Cr and 874 Cr transactions with year on year growth of 20% and 263%, respectively. This rapid growth in the payment systems, inter-alia, has been facilitated by a series of measures taken by the Reserve Bank of India,” the central bank said.

Meanwhile, the RBI has also announced video-based Know Your Customer (KYC) as an option to establish a customer’s identity. This decision was taken to give relief to fintech startups and digital non-banking financial companies (NBFCs) who can now cut costs in a big way. With the new remote customer authentication option, the startups need not physically reach out to customers in remote locations.