Auto-payment for OTT platforms, phone bills likely to get stuck in April due to new rule: Report
The new rule, mandated by the RBI, will require customers’ approval before the transaction is carried out through credit and debit cards.
Customers using the automatic recurring payment method to subscribe to a host of services, including bill payments through debit and credit cards, will have to specifically give their nod for each such transaction from April, the Economic Times reported on Monday.
The impact of the new rule, set to be be applicable from next month, will span across the functioning of over-the-top streaming services like Netflix and Amazon, telecom service providers Vodafone Idea and Bharti Airtel and power distribution companies, according to the newspaper.
According to the new rule, banks will have to send a notification to customers five days before a particular auto-payment is scheduled and can go ahead with the transaction only after it is approved by the user, the Economic Times reported. Additionally, for payments amounting above Rs 5,000, banks will have to send a one-time password, or OTP, to customers to validate the payment. Payments through other routes, such as the National Payments Corporation of India, which operates retail transactions through apps like Bharat Interface for Money, or BHIM, will not be affected.
The rule is a result of a circular issued to lenders by the Reserve Bank of India in August 2019.
The circular notified the implementation of an “e-mandate” from customers for auto-pay transactions through credit cards, debit cards and prepaid payment instruments. The rule was introduced for the sake of an Additional Factor of Authentication, or AFA, according to the RBI circular.
Banks, however, are not yet ready for implementation of the new system, which was mandated by the RBI from the beginning of the financial year 2021-’22, according to the report. In the absence of a set-up required to take permission from customers for transactions which were carried out automatically, many such payments are expected to get stuck next month. Payments worth nearly Rs 2,000 crore are expected to take place through the automatic recurring method.
Prominent banks and card service providers such as the HDFC Bank, Axis Bank, State Bank of India, American Express and MasterCard have started to notify their partners about their inability to process “standing instructions or recurring mandate-based payments”, The Economic Times reported. The vendors have, in turn begun notifying customers, suggesting alternative modes of payment.
The matter has reportedly accentuated since some third-party vendors who facilitate payments through credit and debit cards have denied to share customer details with banks. “Some banks are ready, but few large merchants are refusing to share consumer data as it is not part of existing contractual agreements,” an unidentified banker told The Economic Times. “This problem will persist for at least a few more weeks. We are hoping RBI extends the deadline.”
Meanwhile, the central bank has already turned down a request made by the Indian Banks’ Association on March 26 to extend the deadline on implementation of the new rule, the report stated.