RBI Permits E-Mandates – What’s in it for FinTech India?

The Reserve Bank of India (RBI) has permitted, w.e.f. September 2019, electronic mandate (e-mandate) for transactions up to Rs. 2000. With this, the FinTech industry players are optimistic that the processing of electronic mandate on cards for recurring transactions (merchant payments) will also be extended to allied payments methods, viz. UPI. They also anticipate that the cap on such transactions will subsequently cross the current Rs. 2,000 limit. Following the receipt of requests from financial industry stakeholders to permit processing of e-mandate on cards for recurring transactions with Additional Factor of Authentication (AFA) during e-mandate registration, first transaction, and simple &/or automatic subsequent successive transactions, the RBI considered allowing e-mandate.

The banking regulator acknowledged the dynamism of the payment segment of the market. The RBI also noted the necessity to balance card safety and security during transactions with customer convenience – owing to this, it is agreed to allow processing of e-mandate on cards for recurring transactions (merchant payments) with AFA during e-mandate registration, modification, and revocation – this will also be made possible for the debuting transaction, and simple / automatic subsequent successive transactions, subject to certain prescribed conditions. With these developments, the RBI has signaled that it will be giving due consideration to assessing the nuances of this facility, so as to be able to introduce this feature to allied digital mode of payments (inculcating feedbacks). Following this approval from the RBI, users of this feature can now generate electronic mandates for various cards types: debit, credit, and prepaid payment instruments (PPIs), and also digital wallets.

FinTech companies can now positively expect growth in the subscription-oriented recurring payments’ segment, whilst also minimising the instances of transactional failure. As a result, consumer convenience will also receive a new boost. Utility bills’ payments and billing for entertainment services’ subscriptions are also poised to get seamlessly streamlined. However, consumers should note that a feature of stopping recurring payments is also to be offered by the issuers – per the directions of the RBI – to be used at their discretion. The RBI also made it clear in its circular that there will be no extra charges to be recovered from the cardholder opting to use the recurring payments’ feature via the e-mandate facility. The cardholders intending to register for the e-mandate facility on their respective card will be required to follow a one-time registration process – coupled with an AFA validation by the issuer.

The RBI notification has also clarified that “this directive, issued under section 10 (2) read with Section 18 of Payment and Settlement Systems Act, 2007 (Act 51 of 2007), will come into effect from September 1, 2019.” Prior to this, the RBI brought “recurring transactions based on standing instructions given to the merchants by the cardholders within the ambit of AFA, vide RBI’s circular DPSS.PD.CO.No.223/02.14.003/2011-2012 dated August 4, 2011.”