In Focus: Will your recurring payments fail from today?

Starting today, every customer who makes use of recurring transactions using debit cards, credit cards and Unified Payments Interface (UPI) must undertake a one-time additional factor authentication (AFA) for smooth auto-debit transactions starting today. Failing this, payments to streaming services like Netflix and YouTube Premium and music apps like Spotify will get cancelled. And, if the recurring payment is above Rs 5,000, the cardholder must approve it with OTP-based authentication every time it is due for payment.

Banks have been informing customers for some time now that their standing instructions on recurring payments will not be honoured as comply with the RBI guidelines. 

Now, how do you register for e-mandate before your first transaction?

If you want to opt for an e-mandate facility on a merchant website, you must authenticate the registration via OTP. The registration will be completed only after you furnish requisite information, including the validity period of the e-mandate and value of the recurring transaction.

The new rules have been mandated by RBI while keeping in mind the customer’s convenience and safety during such recurring transactions. Banks are required to send a notification via SMS or email with details of the upcoming charge at least 24 hours before the transaction is set to take place, and another one after the transaction has taken place. You also get to change the mode of receiving these notifications. You will have the freedom to opt out of a transaction or an e-mandate using a link that is provided in the SMS or email. All recurring transactions above Rs 5,000 will have to be approved separately every time.

The RBI had originally set March 2021 as the deadline for complying with the new framework. After extending it by six months, it had warned of “stringent supervisory action” against banks and other players in the ecosystem for any further delay.

There are some recurring transactions that won’t be impacted by the new rules. Standing instruction for auto-debit from a bank account and not a card for mutual fund SIPs, EMIs and insurance premiums will see no change from today.

Some lenders who are yet to comply with the new rules have advised customers to make direct payments for their standing instructions as the old facility has been scrapped. While most major banks and card networks have complied or are in the process of complying, some disruptions can be expected as the new framework kicks in.