If India’s customers were unable to renew their subscriptions to streaming services such as Netflix and Amazon Prime, or even the New York Times platform, it certainly was not due to a technical glitch. The culprit was a new directive issued by The Reserve Bank of India.
This new mandate, which went into effect on October 1, requires banks, financial institutions, and payment gateways to attain additional approval for “auto-renewable” transactions that supersede 5,000 rupees ($67) from users by issuing notifications, e-mandates, and Additional Factors Of Authentication (AFA). This directive affects all debit and credit card transactions.
It’s Time For Compliance
Originally unveiled back in 2019, it was scheduled to launch in April of 2021. However, it was given an extension to September 30 since banks and other key players were not ready to comply.
The response may have not been favorable, as the reaction prompted India’s central bank to state:
“any further delay in ensuring complete adherence to the framework beyond the extended timeline will attract stringent supervisory action”.
In the original statement back in 2019, The Reserve Bank of India said that this particular framework was created as “a risk mitigant and customer facilitation measure”.
The issuer processing these transactions “shall send a pre-transaction notification to the customer, at least 24 hours prior to the actual charge by SMS or email, as per the customer’s preferences”.
Vishwas Patel, executive director at payment gateway firm CCAvenue added:
“RBI’s new rules are good for customers in the mid to long term, as they ensure visibility and control over their billings. It’s very disappointing that banks have not heeded repeated reminders to ensure requisite compliances”.
The banking regulator has granted banks more than two years to ensure compliance.
Not As Easy As It Sounds
As to be expected, in the first few days of implementation, there have been things that have gone awry. Customers and businesses have faced massive disruptions and inconveniences as the ecosystem slowly adjusts to the new rules.
Merchants have been scrambling to find alternative payment solutions for subscribers, while others have temporarily cut back on the range of services they offer.
One customer announced on Twitter that all New York Times subscriptions had been canceled in India.
Another Twitter user and business owner said:
“Our regulator in pretext of protecting customers throttle business operations. Another layer of authentication for card-based recurring payment is a bad idea. Payments to many websites r disrupted”.
These new mandates have created a domino effect, impacting major companies worldwide. Amazon, for example, has had to discontinue free trials for its Prime subscription service in India. This was due, according to their website, to “frictions in the auto payments process”.
Netflix is encouraging its customers to reset their payment mode. One of their options is “Auto Pay” on Unified Payments Interface, which is a service that was only recently enabled.
Apple is recommending its subscribers to “top up its closed-loop wallet” Apple ID to guarantee frictionless payments.
In May of this year, Google ceased on-boarding new recurring payment customers within its Play Store. The company has informed developers that free trials, as well as introductory pricing, should be deleted from all apps until “the ecosystem challenges are addressed”.
New Empowerment For Consumers?
Patel has highlighted that this new directive will empower consumers in the long term when it comes to their online transactions. Previously, customers were required to manage their subscriptions directly from the company’s website. Now, with these new guidelines, customers will only need to visit their online bank account in order to manage them.
Furthermore, it will eradicate payment fraud associated with auto-debit. These guidelines put the user back in control of granting permission for all transactions.
Time will only reveal the outcome of this directive.