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From April 1, Expect Disruptions to These Types of Card Payments: 10 Facts

By Priyanka Verma 
Updated Date

Starting from next month, the auto-payment rules for mobile, utility and other bills are likely to be changed. The Reserve Bank of India (RBI) earlier stated that recurring transactions using debit cards, credit cards, Unified Payments Interface (UPI) or other prepaid payment instruments (PPIs) will need additional factor authentication (AFA) from 1 April. Under the new norms, banks will be required to inform customers in advance about recurring payment due and transaction would be carried following nod from the customer. This rule is likely to impact your monthly subscription charges for different streaming platforms including Netflix, Amazon Prime, Disney+ Hotstar.

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What does the RBI rule say? What will it mean for you? Here are 10 important facts you need to know about the new rule and how it will affect you.

1.From April 1, 2021, recurring transactions will require an additional authentication by the customer (at minimum, at the time of setting up a new recurring payment) to proceed.

2.Initially, the rule was planned on recurring transactions worth up to Rs. 2,000. The RBI, however, announced in December 2020 that on the basis of requests from stakeholders, the limit was raised up to Rs. 5,000. Transactions above that cut-off will require an additional one-time password (OTP).

3.RBI in August 2019 notified all scheduled commercial banks, card payment networks, prepaid instrument issuers, and the National Payments Corporation of India (NPCI) about the big change for recurring transactions.

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4.The ruling is set to be applied on not just banks and financial institutions offering credit cards, debit cards, and other prepaid payment instruments, but also on mobile payment wallets and platforms enabling UPI-based payments.

5.The bank also introduced a March 31, 2021 deadline to comply, with the RBI circular issued on December 4 reading, “Processing of recurring transactions (domestic or cross-border) using cards / PPIs / UPI under arrangements / practices not compliant with the aforesaid instructions shall not be continued beyond March 31, 2021.”

6.Banks and payment platforms offering recurring transactions will have to send a notification to customers at least 24 hours before the first transaction is debited. The mode of notification (SMS, email, etc.) will be chosen by the consumer at the time of registering the e-mandate for recurring payments.

7.That notification will essentially need the customer’s consent — upon which the issuer will be able to proceed with the payment. Subsequent recurring transactions may take place without that extra step.

8.Banks are expected to decline these automatic payments and users will have to make manual transactions to complete bill payments. Banks have also started notifying customers that they will not be able to process recurring payments, meaning until things are sorted out by institutions and authentication is granted, users may have to manually make transactions.

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9.In addition to end consumers, the new rule is likely to impact enterprises that often use auto-payments for their recurring charges. Third-party payment processors have also declined to share customer information with banks due to contractual agreements, which could add to the problem.

10.The central bank has refused to extend the deadline but the matter is expected to be resolved in the coming weeks. Banks and payments platforms are yet to provide clarity on whether they’re ready to operate under the latest regime. Meanwhile, it is expected that automatic payments through banks and wallets may face some hiccups — at least initially.

An executive of an e-commerce company said, “E-commerce companies are committed to adhere to all applicable regulations. However, industry is not prepared to implement the e-mandate framework issued by RBI. Most banks and networks need a few more months to upgrade their systems to comply. Starting April 1, customer e-mandate transactions will be declined by banks, if further extension is not granted by RBI. This will cause major disruption to recurring transactions and will erode customer trust in digital payments.”

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