new rules for recurring payments have adversely affected India’s subscription economy from consumers, small businesses, international subscriptions, and even internet giants such as Amazon, Netflix and Google.
ET takes stock of the new rules, the scale of disruption, as well as alternative modes, which can be used by customers to make their payments that have been failing in the month of October.
What are recurring payments?
Recurring payment is a transaction model where customers give a one-time standing instruction to merchants to debit funds from their accounts automatically on a periodic basis. This model of payment forms core to most subscription-based businesses in India and the world.
What are types of recurring payments in India?
There are three broad categories of recurring payments
- Standing instructions on debit and credit cards enabled between merchants and customers
- E-mandate on National Automated Clearing House (NACH)
- AutoPay on Unified Payments Interface
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What are the new rules by the RBI?
The Reserve Bank of India’s new rules on recurring payments from October 1 are for one-time instructions on debit and credit cards. UPI and NACH based recurring payments have not been impacted.
Merchants can enable recurring payments on cards if:
- Customers’ bank sends pre-debit notification 24 hours before the automatic payment
- Recurring payments above Rs 5000 can only be done with OTP before debit
- Only customers’ card issuing banks can enforce these rules for merchants
Why the friction?
- Most issuing banks have not been able to adhere to requirements
- International merchants with foreign bank partners unable to forge tie-ups with local issuers
- Integrations by smaller banks on common platforms of BillDesk, Razorpay yet not complete
The Impact
Who has been affected the worst?
- Small businesses, media outlets, and SAAS startups running subscription services
- NGOs and charity houses that collect donations on an automatic basis
- International subscriptions such as The New York Times, Wall Street Journal others
- Big internet companies such as Amazon, Apple, Google, Netflix, Facebook
- Customers making automated bill payments, subscriptions
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What are the alternatives?
- Make the payments manually for all subscriptions using debit card, credit card, or UPI
- Link your e-wallet and make the payment as the flow on manual debit is much smoother
- Use UPI autopay or NACH for merchants enabled on these services
- If you’re multiple cardholder check the banks that are active on this service
When will all banks be ready?
- Most smaller banks may not be ready even by next month
- International merchants may have to do away with recurring mandates altogether
- UPI AutoPay, the alternative, is still to go live with most merchants
- Razorpay and BillDesk working to bring all banks on unified platform
- Frictions for merchants further expected when tokenisation rule comes to play from 2022
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