Explained | Effect of RBI’s recurring payment rule on international subscription services

How RBI’s e-mandate rule is affecting India-based users of international subscription services

Updated - November 10, 2021 01:22 pm IST

Published - November 10, 2021 12:54 pm IST

The e-mandate procedure does not apply to ‘once-only’ payments.

The e-mandate procedure does not apply to ‘once-only’ payments.

On October 1, the Reserve Bank of India (RBI) mandated additional factor authentication (AFA) took effect, providing an extra layer of security to consumers against online scams. The move effectively changed the framework of recurring digital transactions.

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According to the new policy, for all recurring payments over ₹5,000 made via debit cards, credit cards, e-wallets, and the Unified Payments Interface (UPI) facility, customers will be asked to verify before the service provider auto-debits cash. For transactions under ₹5,000, consumers have to re-authenticate their standing instructions.

This would override existing standing instructions, and apply to services like OTT platforms, utility bill payments and mobile recharge. The e-mandate procedure does not apply to ‘once-only’ payments.

RBI had earlier planned to roll out the mandate on March 31, but extended it after noting lack of readiness from the part of payment providers. “To prevent any inconvenience to the customers, Reserve Bank has decided to extend the timeline for the stakeholders to migrate to the framework by six months,” the apex bank said in its March circular.

Impact on International subscription services

More than month after the rules kicked in, several consumers continue to face trouble setting up e-mandates for their preferred service. The challenge is acute among subscribers opting to international services, including OTT platforms, cloud storage, subscription-based music sites.

“I understand they’re [RBI] doing it to ‘protect’ consumers but let me opt out of this forced compliance system if I know what I’m doing and am ok with the risk,” Paras Chopra, founder of Wingify, a software firm, tweeted after noting all his international subscriptions were failing.

New York Times subscribers in India couldn’t renew their monthly subscription after RBI’s new rule took effect.

Also Read | Will your standing instructions with payments provider continue unhindered?

“Recent regulatory changes in India are causing disruption for subscribers in this area. This disruption prevents payment from being collected, resulting in a lapse in these subscriptions due to non-payment,” the newspaper service said in its email to customers seen by The Hindu .

Coming to grips with the new regulatory change, overseas businesses are making an effort to ease their customer’s burden by tweaking their subscription plans. The Times for instance has said Indian users will get free ‘Basic Digital Access’ to its service for the next eight months.

Cloud storage provider Dropbox told its customers via email that its engineers are fixing the payment issue, and users will get their accounts extended for another month.

Apple Music has asked its customers to add cash to its Apple ID to continue subscription, according to an email from the company.

Other ways of coping

One of the reasons for overseas payment failure is non-compliance at the international merchants’ end. As a result, the Indian issuing side bans a recurring payment.

Some small business owners are trying to adapt to payment failures by making monthly payments on the merchant’s site directly instead of auto-debit option.

“I had to go into Microsoft 365’s account to pay last month’s subscription,” said Babu Kumar, Chartered Accountant who runs an accounting business for clients in the U.S. “We have to see how it works for the current month.”

The new policy could push small businesses to opt for an annual subscription route to avoid service disruptions, Kumar noted.

Accounting software provider QuickBooks is one of the platforms used by small businesses in India. Owned by U.S.-based Intuit, the company has updated its payment procedure for India users. Instead of using credit cards for recurring payments, the software platform is asking its users to set up Net Banking to process monthly payment.

Google Workspace has also asked its subscribers to make manual payments instead of auto-debits to avoid service disruption.

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