Various digital service providers like OTT platforms have predicted a 10-15% fall in their user base after a change in auto-debit rules comes into effect from October 1.
Banks have started informing customers about changes in auto-debit transactions as mandated by the Reserve Bank of India (RBI). The changes will come into effect from October 1, Livemint reported on Monday.
It quoted a communication from Axis Bank, which said, “As per RBI's recurring payment guidelines, w.e.f. 20-09-21, Standing Instructions on your Axis Bank Card(s) for recurring transactions will not be honoured. You can pay the merchant directly using your card for uninterrupted service."
In April, the RBI deferred new rules on automatic debit by six months. It was done at the request of banks, customers and the digital payment companies, which said they were unprepared for the March 31 deadline.
The new framework was announced in August 2019, and the RBI had warned that “non-compliance will be dealt with seriously”.
There is fear among digital services operations like the over-the-top (OTT) platforms, which fear that they will lose customers who may henceforth find it more tedious to make payments.
What are the changes coming into effect from October 1?
Under the new rules, all recurring transactions will need additional authentication. For payments exceeding ₹5,000, a one-time password (OTP) will have to be validated by a customer each time a payment is due. This will apply to all credit and debit cards, both domestic and international.
How will this impact consumers/users?
Since all the standing instructions will not be processed, mandate registration, modification and deletion will require additional factor authentication.
A large number of credit and debit card users set auto-payment instructions for goods and services ranging from electricity and gas to music and movie subscriptions, and the new rules could lead to chaos for millions of users.
If the standing instructions for bill payments are registered on a user's bank account, there will be no change. The new rules will only impact the standing instructions on debit and credit cards.
Do these guidelines provide safeguards?
The fresh guidelines do provide safeguards to the customer on various aspects. They offer transparency, since customers will now receive an intimation from the issuer on the recurring transaction debit 24 hours ahead of the debit. It also empowers the customer with the facility to cancel the e-mandate before the debit to the card. It also offers customers with an option from the issuer to withdraw any e-mandate at any point of time. Also, the customers will now provide a validity period for the e-mandate — it can’t be for perpetuity.