India is racing towards achieving the goal of recording digital transactions worth Rs 7 lakh crore by 2025, powered by automatic recurring payments of utility, education, savings, investment, food and beverage, e-commerce, and other subscription services. These form the bedrock of unlocking the opportunity to democratise credit, insurance, wealth management and other financial services, and design customised products to effectively serve the poorest.
Unfortunately, some recent actions by the RBI may pose hurdles in achieving the vision. For instance, its circular on processing of e-mandates for recurring transactions prohibits continuation of frictionless e-mandates from modes like debit cards, from October 2021, unless the conditions provided in the circular are met by the stakeholders, primarily banks.
In a country with more than 97 crore cards, and approaching 1.5 crore card transactions on a daily basis, worth Rs 4,000 crore, this can create massive and unimaginable inconvenience to consumers. Mind you, many card users were pushed into the digital ecosystem during the pandemic, and may be once bitten twice shy should their online experience not inspire confidence.
While the RBI acknowledged the possibility of such large-scale disruptions, it has unfortunately not reached out to consumers and consumer groups with a plan to manage such a situation. It has been estimated that monthly transactions worth Rs 2,000 crore could be adversely impacted if prohibition comes into force.
Non-consideration of consumers’ point of view is surprising as the RBI is globally reputed to function very well in consumer interest. The RBI has become much more forthcoming in inviting comments from public on draft notifications and reports. We would urge Shaktikanta Das, the RBI Governor to urgently look into this matter and establish robust processes within the regulator to regularly engage with consumer groups and consider consumers’ perspective while taking decisions impacting consumers at large.
As a result of the circular, most of us are receiving messages from service providers that our e-mandates for recurring transactions will be discontinued from next month. Alas, no clarity exists on steps that consumers are required to take to continue to benefit from services by ensuring seamless payments before the due date, and avoiding penalties or discontinuation.
Many service providers are also moving away from short-term monthly plans/packs to more long-term ones and consequently increasing their prices. Such moves, a direct result of the circular, may disproportionately impact low income consumers, by making services prohibitively expensive, and be antithetical to Mr Das’s vision of inclusive and equitable recovery.
Clearly, the RBI has the right intent i.e. offering safe and secure payment experience to consumers. However, safety cannot and should not come at the cost of convenience and restricting consumer choice. The regulator needs to avoid a top-down approach and closely work with stakeholders, banks, fintech, merchants, consumers, and intermediaries, to ensure transition to a more secure as well as consumer friendly digital experience.
In case automatic card-based recurring payments are discontinued, there is no guarantee that consumers will shift to other modes (like UPI or net banking) and not take assistance from third parties/agents to continue to make card-based payments, which may expose them to security, privacy, and financial risks. No awareness generation and capacity building initiatives have been planned by the regulator, in consultation with consumer groups, to aid consumers in selecting appropriate digital payment modes.
Moreover, nudging consumers to choose one provider over another not only distorts competition and makes the playing field uneven, but may also harm the digital payment ecosystem in the long term.
In addition, the regulator has adopted a one-size-fits-all approach by mandating additional factor authentication for payments beyond Rs 5,000. This not only disempowers consumers, but also robs them of an opportunity to take informed decisions to manage risks relating to digital transactions.
Consequently, the RBI, despite right intent, should avoid making decisions on behalf of consumers, and allow them choice and real agency. Consumers should be free to choose the modes of making digital payments, the amount which they are comfortable in transacting without additional factor authentication, and whether to securely store card details with merchants or not.
The regulator should be concerned with promoting sufficient choice for consumers, facilitating innovation towards secure and seamless consumer experience, and ensuring timely redress of consumer grievances.
To its credit, the RBI is indeed pushing industry to innovate and has recently permitted card on file (CoF) tokenisation. This happened after a strong pushback by stakeholders, including consumers, against the regulatory prohibition to store card details with merchants.
As Mr Das would appreciate, it should not have come to this, particularly at a time when all stakeholders are expected to work together to ensure robust recovery from the pandemic. We, the consumers, industry and regulators, are in this together, and share a common vision of inclusive and equitable digital society. We are ready to play our part, and sincerely hope that Mr Das will too!!
The author is Secretary-General, CUTS International. Prince Gupta and Amol Kulkarni of CUTS contributed to the article.