RBI guidelines on recurring payments continue to cause disruption even after 6 months of deadline

Banks, payment aggregators and card companies had until September 30, 2021 to comply with RBI's recurring payments norms

Delhi-based Anand Sinha runs Leap Club, a membership-based professional network for women. In the first few months after the Reserve Bank of India’s (RBI) new recurring payment guidelines came into effect, his monthly subscription-based platform lost 10 percent of subscribers.

While 10 percent is a small share, it is surely a big hit for the revenues of small businesses. After that setback, Sinha’s platform moved from monthly subscriptions to yearly subscriptions to cut out the surmounting work that goes behind reminding customers to make manual payments every month. But that comes with its own share of challenges while onboarding new customers.

“People think a lot more before making any annual subscriptions. They usually want to try the product for a month or two but that is not possible now,” Sinha said.

Six months after the deadline, many of us still don’t have the option to set up recurring payments on our debit and credit cards.

“The issue still persists. While there has been no resolution for international recurring payments, domestic transactions are also not fully resolved,” said an industry executive to Moneycontrol on the condition of anonymity.

Just as a refresher, RBI’s new guidelines were aimed at empowering customers to take charge of their own recurring payments and also to ensure protection against unrequired recurring payments being set up on their cards.

Banks, payment aggregators and card companies had until September 30, 2021 to comply with the 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, the customers have to give their consent and go through a two-factor authentication process for every payment.

After the deadline customers, banks and subscription-based companies alike saw massive disruption within the first month and as consumers set up their fresh mandates, normalcy returned for a few.

However, with multiple levels of integration still ongoing, 40 percent of recurring payment mandates are still failing, multiple industry sources told Moneycontrol.

The above-mentioned source added that the integration of merchants and banks with multiple payment gateways is still on. With more integrations, more payments across platforms can be set up by customers. Meanwhile, the process of banks aligning their internal processes with the guidelines, which was the key setback soon after the guidelines came into effect, has been completed by most banks now.

“We expect it will take two to four months for all customers to be able to use their cards to set up recurring mandates freely,” he added.

Refrens, a platform that provides a network for freelancers and also helps facilitate their payments has seen a substantial rise in back-end workload in the past few months as pre-set mandates do not work for many.

Naman Sarawagi, co-founder of Refrens said that many businesses on their platform lost out on subscribers since users did not want to take the effort of manually making payments every month.

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“Only 30-40 percent of consumers actually took steps to get their payments on track again. That is a big business impact especially for small businesses. As compared to the period before the deadline, only 20 percent of users are back on the same payments system they used before. Others are making payments manually,” Sarawagi said.

For companies, the pain of making payments for subscriptions with international entities continues too. Back-end efforts to make these payments manually to avoid disruptions in day-to-day operations has substantially increased.

These platforms however are seeing a rise in people using the electronic National Automated Clearing House (eNACH) to make these payments directly through their bank accounts. UPI Autopay is another option but the success rates seen by some of these platforms is currently low, at around 50 percent.

Leap Club’s Sinha added, “We will be happy to go back to a monthly subscription model once the dust settles on card-based recurring payments, or if we see a 90-95 percent success rate on UPI Autopay.”