Apple, Sony, Google, Zoom, PayPal and several other tech companies as well as dozens of banks have warned customers and partners in India to expect an increase in the number of declining transactions as the central bank of the second largest internet market in the world is implementing a new guideline for the way recurring payments are handled in the country.
Reserve Bank of India directive, which takes effect on Friday, requires banks, financial institutions and payment gateways to obtain additional approval for auto-revolving transactions worth over Rs 5,000 Indian ($ 67) from users by performing Notifications, Electronic Mandates and Authentication Factors (AFA). The directive has an impact on all these transactions for debit cards as well as credit cards.
The directive, which was first unveiled in 2019, was due to go into effect in April this year, but was extended until September 30 after banks and other players said they were no longer not quite ready to comply.
India’s central bank was not amused by the way the industry treated its directive, saying in March that “any further delay in ensuring full compliance with the framework beyond the extended deadline will result in action by strict surveillance “.
The Reserve Bank of India said in the original 2019 circular that the framework was designed to serve as a “risk mitigation and customer facilitation measure”, adding that the issuer processing such transactions “will send a notification pre-transaction to the customer, at least 24 hours before the actual billing by SMS or e-mail, depending on the customer’s preferences.
Several companies have reminded their customers and, in some cases, other business partners, of the new directive.
Apple on Wednesday reminded developers that due to the new directive, “some transactions that do not meet these requirements will be refused by banks or card issuers.”
HDFC, India’s largest private bank, posted the following message on its website: “Please note that as of October 1, 2021, the Bank will not approve ANY standing instructions (electronic mandate for processing recurring payments). ) given on the merchant’s website / app, on the HDFC Bank credit card / debit card, unless it complies with the RBI process. Several banks, including HDFC, Axis and Kotak, said this week that they would comply with the new rule.
In May of this year, Google stopped bringing new recurring payment customers to its Play Store. The company told developers that free trials and introductory prices should be removed from apps until “ecosystem challenges are resolved.” YouTube has decided to only support a prepaid (pay as you go) acceptance model for its Premium service.
That same month, Amazon said it was “temporarily” halting new members’ registrations for the Amazon Prime free trial until further notice. There has been no change to this notice since.
The directive has no impact on recurring payments made through UPI, a payment infrastructure built by a coalition of retail banks. Which is why some companies, including Netflix, have added support for automatic payment to UPI in the country.
But its impact is likely to be far-reaching. A fintech founder told TechCrunch that the payment provider they use to advertise on Facebook and Google has informed them that their automatic payments will not be processed as of this week, citing the bank rule. central. The founder requested anonymity to discuss what he considered sensitive.
The new rule is the latest in a series of guidelines that India’s central bank has proposed or implemented in recent years. As Pratik Bhakta points out in an article on The CapTable, these measures illustrate that while the regulator has encouraged the proliferation of fintech startups that innovate for users, the RBI is closely monitoring whether a trend is trying to harm those consumers.
“Until legislation catches up, regulation must adapt to ensure that the financial system absorbs digital innovation in a non-disruptive way,” RBI Deputy Governor T Rabi Sankar said at the time. from a conference earlier this week. “We would only be able to achieve a successful and mature payments system if, over time, all stakeholders attached the proper importance to long-term improvements over short-term gains and internalized mature practices. such as informed consent and transparency in the use of data. “
In emails to PlayStation Plus subscribers on Thursday, Sony said: “As of September 30, 2021, you may see your PlayStation Plus credit and / or debit card payments fail when you try to pay for a subscription on PlayStation Store. “
“This applies to both new subscription purchases and the payment of recurring subscription fees. This means that any future PlayStation Plus subscription fees set to be billed automatically may fail. If this happens, your PlayStation Plus subscription will end.