The banks, payment aggregators and merchants ET spoke with indicated that 10-15% of total e-mandates will continue to fail as some international merchants are declining to comply with RBI’s e-mandate rules as the returns on investment are not worth the trouble.
“Majority international merchants are not going to hop on to the e-mandate solutions being offered by payment gateways, because they feel that the investment and changes they have to make to their systems post the RBI diktat is far too burdensome,” said a senior executive of a large payment system operator.
“So we have several international merchants who have now resigned to the fact that customers will have to take the burden of coming to their sites and process payments if they wish to continue with their subscriptions,” he added.
From October 1, 2021, banks are required to reach out to customers before deducting money towards payments based on standing debit instructions.
The RBI’s new rules mandate that banks can only process auto-debit transactions if they send a pre-debit notification to customers at least 24 hours before the payment is due. They also require a separate process flow for auto transactions above Rs 5,000. These would need customers to authenticate such payments manually with a one-time password (OTP).
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Merchants, both in India and overseas, have failed to tie up with recurring payments platforms offered by payment gateways BillDesk, Razorpay and PayU. For merchants that haven’t yet signed up for the facility, customers have to make direct payments by visiting the merchant website.
According to industry estimates, such payment volumes through recurring transactions amount to $2 billion in annualised gross transaction value (GTV).
Foreign publications and OTT platforms are the worst hit. Apple Music has asked its customers to add cash to its Apple ID to continue the subscription, while Netflix has put several accounts on hold due to a lack of clarity on payment information.
“We will continue to see failed transactions, a large part with international merchants and my sense is till they sign up for UPI autopay or e-mandate services we will be unable to process such transactions,” said an executive of a private bank.
ET had earlier reported that while failure rates in standing instructions could average from 5-10% across banks, currently the numbers are at least a per cent higher than normal transaction decline rates.
“There is hardly any business case for us to onboard e-mandate services. India is a small market for us, and while the RBI wants the rule to suit the Indian cardholder, it doesn’t make sense for us to just fine-tune and integrate our platforms to suit just one market,” said an international merchant who didn’t wish to be named.
