industry

New rules put auto debits in no man's land, merchants forced to curtail services


If you couldn’t renew monthly subscriptions to the New York Times platform or Netflix and Amazon Prime streaming services, you shouldn’t have blamed technology. New central bank rules on automatic debits, which took effect October 1, probably stood in the way, as many high-street banks are yet to make the changes sought by Mint Road.

Recurring payments based on standing debit instructions now require banks to reach out to customers before such deductions are made. About three weeks into the new regime announced by the Reserve Bank of India (RBI), confusion reigns on how merchants, especially those acquiring partners overseas, can re-enable automatic payments for their customers. This has led to a scramble among large merchants on providing alternative payment solutions to subscribers, while others have temporarily curtailed the range of services offered.

Amazon, for instance, has discontinued free trials for its Prime subscription service in India, citing “frictions in the auto payments process,” disclosures on its website showed.

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Netflix is prompting customers to reset their payment mode and one of the options provided is “AutoPay” on Unified Payments Interface, a service the OTT company enabled only last month.

Apple, meanwhile, is advising its subscribers to top up its closed loop wallet Apple ID to ensure smooth payments.

Unhappy Customers

“If you add funds to your Apple ID balance, your subscription payments will continue until the balance is depleted,” said an Apple communication seen by ET.

Google is asking customers of its cloud services to add a new primary payment method “that’s compliant with the RBI.” Others such as YouTube and Facebook have put out similar instructions as well. The resulting confusion has not gone down well with customers or entrepreneurs running their own subscription services. While some blamed their respective banks, several others appeared critical of the regulator, too.

Those affected also include providers of software as a service (SaaS) facilities, media platforms and even telecom companies that generate revenues through subscriptions based on one-time mandates. “The most hated organisation in founder circles right now is RBI,” tweeted Kushal Bhagia, chief executive of VC firm Firstcheque. “Every founder whose biz ran on subscriptions is seething with rage and helplessness watching their retention cohorts get nuked by this random new regulation on credit card subscriptions (sic).”

The central bank couldn’t immediately be reached for its comments.

Besides retail customers, many corporates and MSMEs also pay monthly bills through this automatic deduction route. Industry estimates suggest such payment volumes amount to $2 billion in annualised gross transaction value.

Experts pointed out that while RBI’s new rules on auto payments have led to disruptions, the regulator gave banks more than two years to ensure compliance. “RBI’s new rules are good for customers in the mid to long term, as they ensure visibility and control over their billings,” said Vishwas Patel, executive director at CCAvenue.

“It’s very disappointing that banks have not heeded repeated reminders to ensure requisite compliances.”

Sources said the country’s largest public sector lender, SBI, and card network American Express have not yet gone live. American Express and SBI didn’t respond to ET’s queries.



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