TwinSpark News | From October 1, all recurring payments made through third-party apps will be preceded by a message to the customer at least one day prior to the planned payment alerting him or her of the payment.

According to the RBI‘s new rules, banks must warn consumers of any upcoming recurring transactions, and they must only execute them after receiving their consent. For bills above Rs 5,000, banks would provide one-time passwords (OTPs).

Beginning October 1, 2021, non-compliant recurring purchases on one’s credit or debit card will be rejected by banks. Those using banking platforms, on the other hand, are unaffected.

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According to Anand Kumar Bajaj, CEO of PayNearby, “it will have an influence on customer convenience to some level, particularly in the case of in-app payments, which are supposed to fuel smooth transactions.

” However, customers will ultimately understand that the new legislation is for their advantage because it will improve the security of debit/credit card transactions.”

Previously, users had to complete their purchases for e-commerce or meal ordering services at several consumption locations. However, under the new laws, which go into effect on October 1, payment transactions involving recurring payments made using cards must now be routed via the issuer bank.

Simply said, consumers will be forced to re-register each of their payment instruments for service under the recurring requirement, whether it is a debit card, credit card, or UPI. Following re-registration, the first transaction will need additional factor authentication (AFA) by pre-approving the auto-debit request.

It is important to note that, while repeated trades of up to Rs 5000 can be conducted without AFA, transactions of more than Rs 5000 must be authorized with AFA each time.

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According to industry experts, the new rule will protect consumers’ interests in terms of data security and fraud protection.

“The new laws will only affect auto-debit obligations that entail recurring payments, such as one’s membership with OTT platforms, utility payment service providers, insurance premium, and so on,” says Mandhar Agashe, CEO of Sarvatra Technologies.

Some banks are still in the process of establishing the e-mandate; countrywide activation may take some time.”

What effect will it have on payments?

According to industry experts, this step would protect one’s data and prevent digital fraud, especially in the case of naïve consumers, who are frequently victims of data breaches. To avoid transaction failure, all automated payments must be approved and registered with their respective banks by giving standing instructions.

“The directive will allow card users to control and administer their cyclical transactions,” adds Bajaj of PayNearby. However, there is no need to be concerned about recurring transactions under UPI Autopay and e-NACH because the new standards would have no effect on these transactions.”

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He goes on to say, “Consumers should be aware that the regulation will only affect standing instructions on cards, not standing instructions issued to banks by customers.” As a result, EMIs and SIP payments are unlikely to be disrupted.”

The motive behind the decision

According to analysts, the goal of this improvement is to provide consumers greater control over the auto-mandate feature. Because the client may now define and specify the quantity, velocity, and other parameters of recurring mandates. Through the web-based solutions provided by banks, one can also cancel a specific service at any time.

According to Bajaj, the Reserve Bank of India has implemented the following two-factor authentication to increase the security of online transactions and protect consumers’ interests. “The Bank is concerned that auto-debit transactions on third-party apps and websites may be fraudulent.

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Cash outflows are frequently carried out even when the consumer has opted out. To a larger extent, the RBI is mandating two-factor authentication (AFA) to increase consumer security,” he says.

What effect will it have on end-users?

Beginning October 1, all recurring payments made through third-party applications will be preceded by a notice to the client at least one day in advance alerting him/her of the scheduled payment. And, on the due date, authentication mode will be triggered, and the customer will make the required payments.

“If you utilize a third-party app to auto-pay your invoices, you must re-register before the term ends,” explains Agashe. However, at that time, their web platform should be compliant with the new RBI requirements. Finally, you have the option of using the new auto-debit service or paying directly on their website.”

He goes on to say, “The only thing customers need to keep in mind is that all of their recurring payments are registered with their individual banks that conform with the new laws.”

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