People who have set up recurring auto-debit transactions to pay bills for phone, internet, video streaming and other online services are likely to see the payments fail from April 1 due to the Reserve Bank of India's (RBI) March 31 deadline to banks for putting in place a security measure called Additional Factor Authentication (AFA).
The move is set to affect only recurring debit and credit card payments. UPI-based auto-debit transactions will not be affected.
Additional Factor Authentication requires banks to push a notification to customers five days ahead of when the payment is set to take place. The transaction will only go through after approval from the customer. Banks also need to send a one-time-password to customers for recurring payments above Rs 5,000, according to media reports.
Industry body Internet And Mobile Association of India (IAMAI) has warned that millions of such transactions could fail as most big banks are yet to comply with the RBI's new mandate.
"Industry consultations suggest that most major scheduled commercial banks do not have upgraded capacities to comply. Due to this, the other participants in the ecosystem like acquirers and card networks have not been able to follow the obligations under these circulars," the IAMAI said.
There are technical challenges in implementing the new rules as a common integration between the issuing bank, the acquiring bank and online merchants is needed for authentication messages, a report in ET said citing sources close to the matter. The report said HDFC bank, ICICI Bank, SBI as well as card operators like American Express and Mastercard are notifying network partners about their inability to process automatic payments.
Transactions worth more than Rs 2,000 crore across sectors spanning credit card payments, utility bills, video streaming, and others, are expected to be affected.
The Indian Banks' Association's had asked the central bank to push the deadline, but the request was turned down. The IAMAI has now requested Niti Aayog to weigh in on the issue of timeline extension.