Banks process nearly 2 mn e-mandates for auto-payment

Nearly two million e-mandates for recurring payments have been registered with banks and card networks after the Reserve Bank of India (RBI) made it mandatory from October 1 to take prior consent of a customer before debiting her account, sources in know of the matter said.

Industry estimates peg the recurring transactions at approximately 2.5 per cent of the total volume of transactions, and about 1.5 per cent in terms of value.

Of these, around 75 per cent of domestic recurring transactions, and about 85 per cent international recurring payments are below Rs 5,000.

In August, total credit card transactions stood at 19 million, and debit card transactions at 358.5 million.

In value terms, however, credit cards were at Rs 77,732.94 crore and debit cards at Rs 64,351.52 crore.

Most of the recurring payments are linked to credit cards, while such a facility is not available in most places for debit cards.

Adding both, the volume of recurring payments in the country could be around 9.44 million, but it could be an overestimation as most debit cards may not have internet banking facilities.

Receiving nearly 2 million mandates in a month may also indicate that the initial hiccups could be ironed out in a few months, especially as the registration is a one-time process, according to experts.

Sources in the know say most of the major banks and card networks are fully compliant with the RBI norms, while the rest are in the process and will soon catch up.

State Bank of India, Axis Bank, HDFC Bank, Yes Bank, American Express, Bank of India, Bank of Baroda, ICICI Bank, HSBC, RBL Bank, IndusInd Bank and Kotak Mahindra Bank have already implemented an e-mandate framework for their customers and gone live.

Canara Bank, Punjab National Bank and Standard Chartered Bank are making necessary system changes to allow e-mandates based transactions in accordance with the new rules.

Service providers such as Razorpay, Billdesk, PayU have come up with solutions that are helping card issuers, customers, and merchants navigate through this issue by registering their mandates on their customised platforms.

BillDesk has set up SI Hub, PayU has created Zion, and Razorpay has set up MandateHQ.

But there are minor challenges that need to be ironed out in the future.

A banking source said service providers such as Bill desk, Razorpay have created their platforms and all the issuers will have to sign up with these solutions because the merchants are integrated into multiple such solutions.

For example, Netflix has Bill Desk as the service provider and has integrated into SI Hub, an industry wide platform created after the RBI made it clear it won’t budge after extending the deadline once for six months.

However, there are also alternative industry platforms.

For example, if  Netflix decides to use Razorpay as another service provider, then the OTT player will have to integrate into Razorpay’s solution Mandate HQ.

“So, it depends on which service provider the merchant is hooked on to. Issuers do not have a choice but to integrate with whichever “solution” has the maximum set of merchants signed up”, a banking industry source said.

And then, there are merchants who are compliant with RBI’s rules, and there are those who are yet to.

“The noise that we see in the market today is largely by the third set of merchants i.e., the cross-border merchants because they don’t have a set up in India to integrate into the industry wide platform that has been created.

"So, customers have to do normal one-time transactions for such merchants, unless they integrate into this platform in India," said another banking source.

“Until all the merchants come on board and integrate into solutions, there will be transactions which will not go through,” said the source, adding, the banks are going in a descending order in terms of merchants who have a maximum number of transactions and getting them integrated into the solution.

“This is not a bank-led integration but a merchant-led integration.

"Most of the banks have gone live with SI Hub solution”, he said.

As compliance picks up pace, bankers and payments industry people are warming up to the new framework, aimed at protecting customers from fraudulent transactions and enhancing customer convenience and confidence in digital payments.

Digital transactions have grown multifold in the last few years, and so has the possibility of misuse and fraud.

“From a long-term perspective, this is the right thing to do.

"Only if more time was given for the merchants to integrate into the industry wide solution, it would have helped because the number of transaction declines is also going up," said a source quoted above.

“The pain will linger on for a little more, but over time we should be able to nudge more and more merchants to come on-board,” he said.

Photograph: Krishnendu Halder/Reuters