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Startups To Face Disruption In Subscriptions From April As RBI’s Recurring Payments Rules Change

Startups To Face Disruption In Subscriptions From April As RBI’s Recurring Payments Rules Change

The new rules state that banks will need to send a notification to the customer, five days before a recurring payment is slated, and allow the debit to go through only after the customer okays the transaction

For auto-debit payments of over INR 5,000, banks will even need to send a one-time password (OTP) to the customer

While RBI is adamant that the new rules will kick off from April, most leading banks have said that they’re not ready with the backend support needed to enable additional factor authentication

Starting April, auto-debit payments for mobile and utility bills as well as various subscription-based services will come to a halt as new rules around automatic recurring payments kick in. Standing instructions (SI) registered on credit or debit cards for services such as Netflix, Amazon Prime, Disney+ Hotstar as well as a host of other online services such as billers and insurance providers, among other things will get deactivated. 

Payments through banks, credit and debit card networks, and other online payments wallets will likely fail to comply with the Reserve Bank of India’s (RBI) March 31 deadline, when new rules on additional factor authentication (AFA) for recurring payments through payment cards will kick in. 

The new rules state that banks will need to send a notification to the customer, five days before a recurring payment is slated, and allow the debit to go through only after the customer okays the transaction. For auto-debit payments of over INR 5,000, banks will even need to send a one-time password (OTP) to the customer. 

While RBI is adamant that the new rules will come into effect starting March 31, most leading banks have said that they’re not ready with the backend support needed to enable AFA. Hence, customers who’ve in the past seen their monthly payments go through based on e-mandates on their credit or debit cards would now have to visit the web platforms of each of the services separately and make the payments. 

“In accordance with regulatory requirements, processing of e-mandates for recurring transactions, which have been registered on your credit or debit card without Additional Factor of Authentication (AFA), will be discontinued w.e.f. April 1, 2021. You may make payments directly through your card at the merchant website or application,” read the communication sent out by Axis Bank to its customers about the development.

It must be noted that standing instructions registered using bank accounts for recurring payments such as house rent, mutual funds and SIPs will continue. Recurring payments through platforms owned by the National Payments Corporation of India (NPCI) will also not be affected. 

The new rules for e-mandates come as part of widespread changes in digital payments, mandated in RBI’s new guidelines for payment aggregators (PAs) and payment gateways (PGs). The new guidelines disallow PAs and PGs from storing customers’ card details with them. So, for one-time online purchases through credit or debit cards, users would now have to patiently type their card number and other details each time, to obtain an OTP for completing the transaction. 

With the new guidelines, RBI is looking to curb the increased instances of hacks and data leaks affecting customers. However, the ease of payments for customers will be a sure-shot casualty in the process.