No more Automatic Recurring Payments from April 1, 2021. RBI mandates additional Authentication for further compliance

Card Payments

There will be no automatic recurring payments from April 1, 2021, for services like utility bill payments and recharges as per RBI’s Additional Factor of Authentication (AFA) mandatory. However, various Payment Gateways and Banks are seeking an extended timeline to comply with RBI’s AFA.

To mitigate financial risks for the people of India and stakeholders, RBI on December 4, 2020, directed all banks, payment gateway providers and various payment & finance institutions that all sort of automatic payments will become non-compliant with AFA from April 1, 2021, and would not be continued further. The step is intended to fuel the safety and security of card transactions.

As the new practices under AFA say, Banks are required to inform customers in advance about automatic payments or the concerned dues and every transaction would be carried forward only after a nod from the customer. Thus, a customer gets full control over the payments being made, making anything barely automatic without authentication. For bills above Rs 5000, banks should be providing a one-time-password(OTP) to the customer.

Recently, RBI enhanced the limit for contactless card transactions and e-mandates for recurring transactions through cards (and UPI) from Rs 2,000 to Rs 5,000 from January 1, 2021, to further the adoption of digital payments safely and securely. Non-readiness of some of the players could impact hugely on recurring payments such as utility bills, recharge of phone, DTH, OTT, among others, post-March 31, 2021.

Speaking on the scenario, Vishwas Patel, Chairman of Payments Council of India, who is also the executive director of Infibeam Avenues, said “All the ecosystem players, be it banks and payment gateways, are guilty of not taking RBI directive seriously from 2019, and not being able to come on a single platform, which we should have done at least a couple of months back, so that there could have been a smooth transition to the new way of doing recurring transactions.”

“With the situation in hand, the Reserve Bank of India (RBI) is requested to consider giving at least one-month extension so that players meet RBI directives. Everybody has understood the seriousness of it because it is Rs 2,000 crore a month business, as per PCI estimates. We hope that the cycle is not broken and the end consumers and merchants are not inconvenienced,” he added.

The industry is not prepared to implement the new framework yet. All the customer e-mandate transaction will be declined by banks from April 1, 2021. This is very much bound to discredit the ongoing momentum in the markets, particular to digital payments.

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