Auto-debit of credit card: RBI extends timeline and an alternative option to it

RBI has decided to extend the timeline for additional factor authentication on recurring payments using the cards till September 30, 2021. The alternative options to auto-debit on card are transacting through BillDesk or Bharat Bill Payment System.

April 02, 2021 / 11:07 AM IST

The Reserve Bank of India (RBI) has differed the deadline to implement curbs on the auto-debit facility that has been available to you on your credit card, by another six months. Those curbs were to have come into effect from April 1, as per RBI’s original plan.

Had the plan come into effect, your payment instructions to pay your monthly utility bills, insurance premium and other such services would have been affected. That’s because, starting April 1, your e-mandate transactions for bill payments and subscription renewals through card were likely to fail due to Reserve Bank of India's (RBIs) guidelines on additional factor authentication on recurring payments.

But since the infrastructure in the Indian banking system is not yet in place, the central bank has now extended the timeline for the stakeholders to migrate to the framework till September 30, 2021.

What was RBI’s problem with payment authentication?

Presently, credit cards mandate a 2-factor authentication as per RBI’s guidelines. This means that in addition to providing the CVV number when making a purchase (this is the secret code imprinted at the back of your credit card), you also get a One-Time Password (OTP) on your mobile. Once you enter this OTP successfully, your transaction goes through.

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However, credit cards also used to allow auto-debits for future payments for the same service. For instance, paying a utility bill every month or a newspaper subscription or, say, a Netflix subscription renewals. It was convenient, but there was a small problem in this. “There was a rise in customer complaints, among those who had opted for auto-debits, that at times their credit cards were debited of charges inspite of opting out,” says a retail banker requesting anonymity.

Now, in a bid to strengthen the safety and security of card transactions, the RBI has made additional factor of authentication mandatory after September 30.

Will your subscriptions get cancelled after September 30?

The answer is no. But as things look currently, it could be a tad inconvenient as there would be an additional step you will have to take to authenticate all your future subscription renewals payments. Though, to be sure, it would become much safer for you, the consumer.

Under the new norms, the banks will be required to inform customers in advance about recurring payment due and the transaction would be carried after receiving approval from the customers.

If your subscription renewals amount is more than Rs 5,000, then your amount would not be auto-debited. Your credit card issuing bank will first send you a message, every time your subscription amount is due. Only after you authenticate- your card will set up a process for you to do this- will your money get auto-debited. Depending on how the infrastructure evolves, you might have to generate an OTP and then enter that to allow the renewal (subsequent) payment to go through.

For transactions below Rs 5,000 the recurring payments through cards will continue as earlier.

Which payments would be impacted?

Auto-debit payments for mobile phone bills, broadband, electricity, water, insurance premium and other utility bills will be canceled if the bill amount is above Rs 5,000. For instance, if your electricity bill is above Rs 5,000, it will not be auto-debited from your card that is linked. But, you can pay it manually online using the same debit or credit card after September 30 if the banks fail to setup the framework.

Also, many consumers keep insurance premium payments on auto-debit through a standing instruction on their credit card. This will stop, too, if the premium amount is above Rs 5,000, after September 30. “You must seek an update with the bank issuing a card about additional factor authentication implementation of auto-debit framework in September to get the clarity on execution,” says Jeegar Shah a Mumbai based financial distributor.

For now, standing instructions registered using net banking for paying utility bills, insurance premium, home loan and auto loan EMIs, etc. will continue even after September 30. Similarly, the auto-debit feature will remain in place for investments in mutual funds through SIP payments.

Life after September 30: what will happen to subscription payments?

From October 1, for recurring payments through third-party merchant websites, the bank would need to send you a communication five days in advance and at least 24 hours before the payment date. This reminder is meant to tell you about an upcoming, scheduled payment. It would also give you an option to opt out or part-pay the amount.

What’s an alternative option to auto-debit on card?

If you concerned about auto-debit and wish to shift to an additional factor authentication process right away, there is an alternative.

You can use the online bill payment firm such as BillDesk BillPay service or the Bharat Bill Payment System. Both these platforms allow you to view the bills generated by the registered billers before processing the payment. It sends an alert through email, message when bill is generated and send the reminders of bill due date. The payment is not auto-debited from the card registered on their website. They are already complying with the RBI’s additional factor authentication.

What is BillDesk BillPay service?

You can access BillDesk BillPay service using internet from your home or office. All you need is Visa credit or debit card to make payments. You can pay your utility bills, insurance premiums, etc.

There is an additional benefit, you may be eligible to earn reward points on the card or earn special discounts from the service provider for making the payments.

How to make payments through BillDesk BillPay – Register and Pay Service?

To be able to avail these services you need to complete a short registration process and only need to enter your biller details just once. Thereafter every billing cycle, in addition to the physical bill delivered at home, you will also receive a summary of the bill electronically at BillDesk BillPay in your login. You will receive email alerts informing you of the bill generated and will send email reminders for due dates. You just need to login to your account and authorise payments of bills generated to complete the transaction. With this payment process for recurring bills they are already complying with the RBI’s additional factor authentication.
Hiral Thanawala is a personal finance journalist with 8 years of reporting experience. Based in Mumbai, he covers financial planning, banking and fintech segments from personal finance team for Moneycontrol.
first published: Apr 2, 2021 09:50 am

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