Your auto-debit payments set to fail next month | Economic Times

April will likely usher in a huge disruption for millions of bank customers used to making automatic recurring payments for a host of services, from mobile and utility bills to subscription charges for media content and over-the-top streaming services. Even companies such as Netflix and Amazon, Bharti Airtel and Vodafone Idea, Tata Power and BSES will be affected.This is thanks to the Reserve Bank of India’s (RBI) March 31 deadline for banks, card networks and online vendors to comply with new rules on additional factor authentication for customers’ recurring payments through debit and credit cards.The new rule is that banks will need to send a notification to customers five days before the payment is slated to be deducted and allow the debit only after an okay from the customer. For recurring payments above Rs 5,000, the new rule also requires banks to send a one-time password to customers.RBI has said the new system will kick in from start of FY22. However, major banks and vendors say they are not ready for the changeover.This means that from April, automatic monthly customer payments through debit or credit cards for many services will fail. Till banks and merchants come up with an alternative, customers will have to visit payment pages of individual merchants to pay bills or continue subscriptions. However, payments through other means such as NPCI platforms won’t be affected. 81741502Many corporates and micro, small and medium enterprises (MSMEs) too pay monthly bills through this automatic route. Industry estimates of this payment volume for April, consumer plus business, is around ₹2,000 crore.‘Unable to Process Standing Instructions’ET has learnt that HDFC Bank, ICICI Bank, Axis Bank, State Bank of India, leading card scheme operators American Express (Amex) and Mastercard, have all started notifying network partners their inability to process “standing instructions (SI) or recurring mandate-based payments.” Vendors have started notifying customers as well, along with suggesting alternative modes of payment.ET has reviewed at least three such mailed communications from ICICI Bank, Axis Bank and Amex to intermediaries. “While all industry partners and issuers are working on these changes to get implemented, it may not be possible to go live with these requirements by March 31…Axis Bank will be declining all SI payments...” according to one such private communication seen by ET.“We are currently building a solution in adherence to regulatory requirements… beginning April 1, any SI or recurring transactions won’t be approved by Amex,” read another such notice by Amex to its merchants and network partners.Mails sent to banks and card networks cited above, as well as RBI, didn’t elicit any response till time of going to press.Industry Highlights ComplexityThe new rule for processing recurring payments was first issued by RBI in August 2019. Most banks have not developed backend capabilities to support the new system as the design flow is “complex,” according to the industry.“There are obvious complexities in implementation as there needs to be a common integration between the issuing bank, the acquiring bank and online merchants for seamless data exchange to issue personalised authentication messages,” said a banker, requesting anonymity.“Some banks are ready, but few large merchants are refusing to share consumer data as it is not part of existing contractual agreements. This problem will persist for at least a few more weeks. We are hoping RBI extends the deadline…” the banker added. The last request for an extension was made by Indian Banks’ Association on March 26, but declined by the central bank, said people familiar with the matter.“RBI has shut all channels of communication on this topic,” said an industry executive. “The ecosystem is not ready at all to deal with such friction in payments. Maybe when they (RBI) see the transaction failure rates going up dramatically, they could be willing to listen to us again. We understand where RBI is coming from, it wants to plug frauds, but the ecosystem has to be ready before these regulations are implemented.”BillDesk HubA new ready-made SI mandate system — created by payment gateway BillDesk, along with Visa, and called the SI Hub — has also emerged as an alternative route for some of the transactions.“The biggest issue is that there is no system where banks can share pre-debit details for all standing instructions with customers,” said a senior banker. “There are lakhs of merchants and we process transactions basis the bills raised. This is not our job. If an aggregator does this, we can use its services.”“BillDesk has set up such a platform and we are already in the process of enrolling their services,” the banker said. However, an industry insider said BillDesk’s system can take only up to 30% of the overall volume, and that many transactions will fail.