Card payments: Auto-debit payment rules change from October 1

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Updated: October 01, 2021 1:07 PM

From Oct 1, for recurring payments of above Rs 5,000 on debit and credit cards, banks have to send an OTP besides a link containing bill details to the customer

Without the standing instructions we create for these payments, it’d be hard for us to keep track of various due dates, and the result would be missed payments and penalties.Without the standing instructions we create for these payments, it’d be hard for us to keep track of various due dates, and the result would be missed payments and penalties.

From October 1, the Reserve Bank of India’s new regulations for recurring payments on debit and credit cards come into play. If you have been using your card to buy OTT subscriptions such as Netflix, pay utility bills, pay insurance premium, or buy anything through a recurring charge to your card, you need to pay attention now because your payments will likely fail.

While OTT subscriptions or utility bills can easily be paid for via alternatives, it could be more painful to miss an insurance payment which could lead to lapsed coverage. Automatic bill payments are an essential part of our financial lives because the payment systems handle the tracking and paying on our behalf. Without the standing instructions we create for these payments, it’d be hard for us to keep track of various due dates, and the result would be missed payments and penalties.

What changed?

Last year, to improve the safety of recurring, card-not-present transactions such as the payment of your electricity bill via your credit card, the RBI announced a new set of regulations. In it, the banking system, online merchants, and payment gateways had to create and integrate into a single payment platform. This platform would also require customers to register their billers afresh and create new standing instructions for recurring payments which allow bills to be settled automatically via their cards. Per the new regulations, customers should also receive a text or email alert about upcoming transactions along with a link containing details of the bill that is to be settled via their card.

The link would provide options to view, modify, or even cancel the transaction. Any recurring payment of above Rs 5000 would require additional authentication via OTP. The measures make card-not-present transactions safer and alert customers to upcoming payments which can now happen with their knowledge and consent. With that, the pain of managing unwanted transactions is minimised for the customer, bank, as well as the merchant.

What now?

The RBI earlier intended the digital payment ecosystem to integrate into this new system by April. However, the deadline was pushed to October 1. Therefore, now, one of the two things may occur. One, your bank and your preferred online merchants (OTT platforms, music streamers, utilities, etc.) have already integrated into this new system, and all you need to do is check with your card issuer (typically your bank) about how to create new standing instructions so that your bills continue to be paid on time via your preferred card. Or two, the integration hasn’t yet happened and you’ll have to settle your bills through alternative means such as netbanking, UPI, or through any other means acceptable to your merchants. Also, such alternative payments may be one-time payments, unless your merchant provides you a way to make recurring payments.

What about non-card payments?

There are many ways to automatically settle bills. Some customers use debit or credit card mandates. Some use UPI and bill payment websites. Many use the bill payment facility on their netbanking. The new RBI rules impact standing instructions for recurring payments on credit and debit cards, UPI, and pre-paid cards. The rules will not impact standing instructions issued via your bank account. Therefore, your SIPs, EMIs, or any other payments linked to netbanking should continue to go through without any problem. You should watch out for any communication regarding this from your bank and get clarity on this, just to be certain. You do not want to miss any important payment.

Is my bank ready?

Judging by the messages being sent out by some large banks, it seems the integration of various payment tools is still a work in progress. If that remains the case even after October 1, you would not be able to recreate your standing instructions on your card, and alternatives will have to be used. Therefore, you may keep an eye on your payments and ensure no bill payments linked to your debit and credit cards are missed. The new system will require you to undergo the one-time pain of setting up instructions again, but this will, on the whole, make your payments safer.

(The writer is CEO,

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