Startups To Face Disturbance In Subscriptions From April As RBI Changes Recurring Payments Rules

Auto-debit payments for mobile and utility bills as well as various subscription-based services will come to a standstill starting April as new rules for 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 multiple 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 probably 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 be rolled out.

The new rules assert that banks will have to send a notification to the customer, five days before a recurring payment is scheduled, and enable the debit to go through only after the customer confirms the transaction. For auto-debit payments of more than INR 5,000, banks will also need to send a one-time password (OTP) to the customer.

While RBI is resolute that the new rules will come into effect starting March 31, most leading banks have stated that they’re not ready with the backend support needed to enable AFA. Hence, customers who in the past have 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 individually and make the payments.

The communication sent out by Axis Bank to its customers about the development read, “Following 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.”

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 broad changes in digital payments, mandated in RBI’s new guidelines for payment aggregators (PAs) and payment gateways (PGs). The new guidelines forbid 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 type their card number and other details each time, to obtain an OTP for completing the transaction.

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

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