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Since October 1, Twitter timelines have been abuzz with angry and confused customers dealing with failed payments for their subscriptions.
The Reserve Bank of India’s new auto-debit norms were meant to cause “short-term” disruptions and they have done so – except, it does not seem short-term.
Banks, payment aggregators and card companies had until September 30 to comply with norms under which standing instructions for recurring payments such as subscriptions and bill payments stood cancelled. Customers had to re-authenticate these standing instructions for transactions up to Rs 5,000. After a two-factor authentication, customers would be charged and an e-mandate would be set up for subsequent payments.
For recurring payments above Rs 5,000, customers had to give their consent and go through a two-factor authentication process for every payment.
Seems simple, albeit with a small blip, right? But many banks are not ready to comply with the norms even after repeated extensions by the RBI. The latest deadline is pretty much non-existent as customers wait for their banks to comply.
“It is noted that the framework has not been fully implemented even after the extended timeline,” the RBI stated on March 31 while extending the deadline again. “This non-compliance is noted with serious concern and will be dealt with separately. The delay in implementation by some stakeholders has given rise to a situation of possible large-scale customer inconvenience and default.”
The objective of the norms was to empower consumers by giving them a heads-up before their accounts were debited and offering them a chance to opt out if they wished to discontinue. Instead, people have been left clueless about what’s gone wrong with their payments (including international) and companies with subscription-based models are struggling with frozen revenue streams.
Here’s a look at those affected by non-compliance at various levels, 20 days past the deadline:
While biggies like Netflix, Amazon Prime and Disney+ Hotstar can deal with a temporary drop in subscriptions, small businesses and startups are taking a hit. Apart from the challenges that come with starting up a business and growing and sustaining the client and user base, startup founders now have to deal with bottlenecks in their revenue streams.
This includes media outlets, SaaS providers, furniture rental platforms and web-hosting platforms whose revenue stream consists mainly of monthly payments or subscriptions. Most of these startups have seen a drop of up to 90 percent in their subscription income.
Udit Goenka, founder of SaaS products marketplace PitchGround, said this has led to a drastic rise in workloads as the startup has had to repeatedly reach out to customers and ask them to pay manually.
“We have only been able to recover 15 percent of payments. We are already in the middle of October and the nightmare is far from over. This disruption may continue even in November. Plus, we do not want our customers to face disruptions either,” Goenka said.
Charity begins at home, they say. Well, only if you can pay! For many non-profit organisations, regular monthly donations have failed.
The Internet Freedom Foundation has about 420 donors who make monthly contributions through auto-debit mandates. Since the beginning of this month, 70 percent of these payments have failed, wiping out about Rs 3 lakh in monthly donations. Concerns are rising over how the situation will be by the end of this month.
“We had organic growth of anywhere between 15 to 30 new donors signing up every month – that too has been impacted,” IFF executive director Apar Gupta said. “We are now urging donors to make one-time payments and have launched a fundraiser.”
While donors have been asked to make their contributions through other modes like net banking and UPI, organisations like IFF are worried that not all donors will make the shift for this month at least.
Subscribers to international news publications or cloud services know that the only way to sign up and pay is through credit cards. This is not limited to small payments. Businesses across India seek services and products from abroad that are key for their day-to-day functioning.
While for payments in India there are alternative options like direct debit, fund transfers and UPI, these cannot be used for international subscriptions. What makes matters worse is that global B2B service providers may not change their subscription models to allow one-time payments just for India.
Investment research and wealth management company Capitalmind hosts its podcast on a foreign platform and also has other international services that it pays for every month, all of which failed in October.
“We had to manually make these payments after we realised the payments are not going through. It was a pain, but we got it back on track,” said founder Deepak Shenoy.
You and I
While you and I don’t deal with balance sheets and business disruption, having Netflix or Spotify payments fail can be a hassle in itself. Payment plans have to be changed to listen to self-curated playlists on the way to work and watching that new show may have to wait.
Streaming services such as Amazon Prime, Disney+ Hotstar, Sony Liv, Netflix and Spotify had informed users about a possible disruption and given them options to pay through different modes. Netflix allowed users to pay through UPI AutoPay. If all else fails, customers were asked to continue paying by filling in their card details each time and authenticating the payments.
Stand-up comedian Anshu Mor has seen both sides. On the one hand, his iCloud subscription lapsed and he was bombarded with mails on the failed payment with no real solution given by Apple. He took a few days until he figured he could pay by loading money into Apple’s wallet.
On the other hand, Microsoft had a little surprise for him – his Xbox Live Gold and Office 365 subscriptions were now free for the next eight months! Microsoft ensured that customers could continue using its products without any disruptions and eliminated the risk of losing them.
The mail from Microsoft to its customers read: “We at Microsoft are updating our payment systems to enable recurring payments in accordance with these requirements. In the meantime, to help avoid disruption to your subscription, we have added eight months of Xbox Live Gold to your account at no additional charge so you don't have to worry about making recurring payments during this time and can just enjoy playing games.”
“I was pleasantly surprised with this. It is not just about the cost – they have made it so much simpler! That is what disappointed me when it came to Apple. It is important to make it simpler for customers to navigate these challenges,” Mor said.
New norms preferred
Many platforms offer free subscriptions for a month so that customers can experience the offering before deciding to pay for it. However, the free month comes only after card details, including the CVV, are submitted.
With these details, the platform could earlier auto-debit the subscription amount without even giving a heads-up unless the customer opted out. Many such customers refrained from trying out the product just to avoid sharing card details. Others plan to try the product only for a month but forget to opt out and end up paying for another month.
Muralidhar Swaminathan, a regular subscriber of OTT platforms, said, “These platforms don’t even inform you before taking your own money. I would like to be informed by the platforms beforehand. I am totally in favour of digital payments, but we cannot be careless.”
Under the new norms, banks will now inform customers before every auto-debit for payments up to Rs 5,000. For higher recurring payments, it will also seek an OTP-based authentication each time.
However, as easy as this sounds, the norms can be implemented only if all players are on board. Especially banks, many of which are still not on board.