Mumbai: If you could not renew a monthly subscription to the New York Times Platform or Netflix And Amazon Prime Streaming services, you shouldn’t have blamed the technology. Central bank’s new rules on automatic debit, which
effective 1st October, probably stood in the way, as many high-street banks are yet to make the changes demanded by Mint Road.

Recurring Payments Based on permanent debit instructions, banks are now required to reach out to customers before making such deductions. About three weeks into the new arrangement announced by reserve Bank of India (reserve Bank of India), there remains confusion over how merchants, especially acquiring partners overseas, can automatically re-enable payment for their customers. This has led to a scramble among large merchants to provide alternative payment solutions to customers, while others have temporarily reduced the range of services offered.

For example, Amazon has stopped free trials for its Prime subscription service in India, citing “friction in the auto payment process,” showed a disclosure on its website.

Netflix is ​​prompting customers to reset their payment modes and one of the options provided is “autopay” on the Unified Payments Interface, a service the OTT company enabled only last month.

Meanwhile, Apple is advising its customers to top up their closed loop wallet Apple ID to ensure smooth payments.

“If you add funds to your Apple ID balance, your subscription payment will continue until the balance is depleted,” said an Apple communication seen by ET.

Google is asking customers of its cloud services to add a new primary payment method that is “RBI compliant.” Others such as YouTube and Facebook have given similar instructions.

The resulting confusion has not gone down well with customers or entrepreneurs running their subscription services. While some blamed their respective banks, many others also criticized the regulator.



Platforms, telecom companies affected

Those affected include software providers as a service (SaaS) facilities, media platforms and even telecom companies that generate revenue through subscriptions on a one-time mandate basis.

Kushal Bhagia, chief executive of VC firm FirstCheck, tweeted, “The most hated organization in the founder circle right now is RBI. “Every founder whose business runs on subscriptions is emerging from this random new regulation on credit card subscriptions (sic) with anger and helplessness at the sight of their retention group.”

The central bank could not be immediately contacted for its comments.

Apart from retail customers, many corporates and MSMEs also pay monthly bills through this automatic deduction route. The industry estimates that such payments amount to $2 billion in annual gross transactions value.



compliance time

Experts pointed out that the disruption has been caused by RBI’s new rules on auto payments, with the banking regulator giving banks more than two years to ensure compliance.

Vishwas Patel, executive director of payment gateway firm CCAvenue, said, “The new RBI rules are good for customers in the medium to long term, as they ensure visibility and control over their billing. “It is very disappointing that banks have not heeded to repeated reminders to ensure requisite compliance.”

RBI’s new rules mandate that banks can only process auto debit Transactions if they send pre-debit information to customers at least 24 hours prior to payment. They also require a separate inflow for auto transactions above Rs 5,000. This would require customers to manually authenticate such payments with a one time password (OTP).

“The RBI has placed a lot of responsibility on the issuing banks to inform and facilitate such transactions,” said Raman Khanduja, chief executive officer of fintech firm Mintok. “This has complicated the entire flow, as challenges in coordination between international acquirers and merchants with Indian banks may create some friction.”

Sources said the country’s largest public sector bank, State Bank of India (SBI) and card network American Express are yet to go live. American Express and SBI did not respond to ET’s queries.



No clarity with banks

ET had reported in September that top private sector lenders such as HDFC Bank, ICICI Bank and Axis Bank are working towards compliance through tie-ups with payment gateways BillDesk and RazorPay. However, it is not clear whether these banks have been activated with recurring mandates for all major merchants including those mentioned above.

Officials said most Category A merchants are aggressively engaging customers on their proprietary wallet platform. “The customer communication from these merchants clearly indicates that they do not want to rely on the banking channel alone to ensure smooth flow of transactions,” said an executive of a leading merchant.

Another official of a payments company said banks and merchants are yet to agree on scrapping the responsibility matrix.

“While many merchants who have small value transactions are yet to take a call on the way forward, the final action required to complete the purchase lies with the banking institutions, to comply with the guidelines introduced Not fully equipped, which leads to a lot. For the transaction to fail,” an industry executive quoted above.

To be sure, there may be some costs associated with the change.

“Policy interventions that mandate industry to replace these consumer convenience features will be costly for all stakeholders,” said Srinath Sreedharan, Visiting Fellow at the Observer Research Foundation. “Service providers may lose out on consumers who can opt for other modes of payment. In the case of regulatory-industry engagement, it also points to the greater risk of regulatory influence, which could inadvertently shape consumers’ tech choices.”