While the banking regulator has taken the first major step, the next would be to allow recurring payments on Unified Payments Interface (UPI), industry insiders said.
Digital payment companies like Paytm, Razorpay and card schemes like Visa, Mastercard are eyeing new avenues of business as the Reserve Bank of India has allowed consumers to make recurring payments of up to ₹2,000 by giving an emandate from next month.
This means one can set auto pay instructions for small-value repetitive transactions such as subscription payments and bill payments on mobile wallets or debit andcredit cards without having to put in the second factor of authentication every time a payment is made.
While the banking regulator has taken the first major step, the next would be to allow recurring payments on Unified Payments Interface (UPI), industry insiders said. “The volume and the frequency of payments for utility and entertainment services make these some of the best use cases to transition into digital payments (from cash),” said TR Ramachandran, group country manager, India and South Asia, at global payments major Visa. “Towards this end, the RBI’s decision to permit e-mandate on cards will be a strong enabler to grow digital payments across the country.”
The Reserve Bank in a note released late on Wednesday had said: “It has been decided to permit processing of e-mandate on cards for recurring transactions (merchant payments) with AFA (additional factor of authentication) during e-mandate registration, modification and revocation, as also for the first transaction.”
The move has brought cheer to the payments industry that has been reeling under the government mandate to make all merchant payments free of cost. The mandate to bring an additional authentication point while starting, stopping or changing this service in any form will ensure security of such transactions, industry insiders said. “There is a lot of innovation that can be built on this,” a top executive at a digital payments company said. Video streaming and subscription applications are obvious candidates to offer recurring payment services; which other category of merchants would be eventually allowed to offer such services is something that needs to be found out, the person told ET on condition of anonymity.
A Mastercard spokesperson said that in the internet of things, there is a need to balance security and convenience for customers. “Mastercard looks forward to working with RBI to enable frictionless flow of a payment process… enhancing the consumer experience of using digital payments.”
Top executives such as Harshil Mathur, CEO at Razorpay, and Naveen Surya, chairman of Fintech Convergence Council of Internet and Mobile Association of India (IAMAI), said the RBI move will smoothen payments experience of consumers.
Some industry insiders felt the central bank could have kept a higher limit for recurring payment facility because a lot of large-value payments such as rental and investment payments cannot be included here. “The cap of ₹2,000 is low for many use cases like subscription, bill payments, education fees, rental payments and others,” said Vishwas Patel, founder of digital payments major CC Avenue Payment Gateway. “Hopefully RBI will have a relook and increase the cap amount soon.” Also, addition of UPI would give a huge boost to adoption of recurring payments for smallvalue transactions, since anyway UPI has caught the imagination of Indian consumers, Patel said.