Stalling of auto-debit mandates: What should you do now? Will it make transactions safer?

By: |
September 30, 2021 8:04 PM

The Reserve Bank of India has taken this step to save you from falling in the clutches of fraudsters by further securing the payment process.

credit card, credit card payments, standing instructions on credit cards, recurring transaction registration, e-Mandate, RBI guidelines, additional factor authentication, AFAThe new process may be secure, but the additional factor authentication (AFA) at the time of making online payments may frustrate you.

As the Reserve Bank of India’s (RBI’s) new guidelines become effective from October 1, 2021, auto-debit mandates for payments of utility bills, insurance premiums, subscriptions to online services and credit card bills will not go through. The RBI has taken the step to save you from falling in the clutches of fraudsters by further securing the payment process.

“The RBI’s decision is a huge leap forward in safeguarding customers’ interests whilst enhancing the security of payments. With the new regulations, customers will now be required to re-register each of their payment instruments, may it be a debit card, credit card or UPI for a service under the recurring mandate. Post-re-registration, the first transaction will have to be executed via additional factor authentication (AFA) by approving the auto-debit request beforehand,” said Mandar Agashe, Founder, Vice-Chairman and MD, Sarvatra Technologies.

However, AFA will not be required for all the transactions, but for transactions above certain limits.

“Consecutive transactions, for value upto Rs 5,000 can be executed seamlessly without AFA, while transactions of value above Rs 5,000, will require chipping in the OTP every time. While at the onset, this may impact customer convenience to some extent, it will elevate payment security to new levels,” he said.

So, a single payment won’t let the payee auto deduct renewal subscription periodically without your authentication.

“Most importantly this will give the control back in the hands of the customer whilst driving simplicity and transparency as he can now determine and set the amount, velocity etc. of recurring mandates besides even annulling a service whenever required through web-based solutions offered by the banks. The new regulations will bring in uniformity across services while building a ubiquitous platform within the payment ecosystem across recurring mandates,” Agashe further said.

Beware SBI Cardholders! From Oct 1, your auto bill pay may stop if you fail to do this

The new process may be secure, but the additional factor authentication (AFA) at the time of making online payments may frustrate you.

“Earlier, consumers used to complete their transactions at a multiple consumption points for e-commerce or food ordering services. But now with the new regulations being effective from October 1, 2021, payment transactions pertaining to recurring payments using cards, will have to be routed through the issuer Bank. Consumers who have completed the registration process advised by RBI will not face any issues on recurring mandates. While this may seem a little inconvenient from the consumer perspective, it is a welcome move by the Regulator and is in the interest of the consumers,” said Anand Kumar Bajaj, Founder, MD & CEO, PayNearby.

The rise in cyber fraud incidents has prompted the RBI to adopt AFA to safeguard the online transactions further.

“India is the only country to offer PIN on cards at the POS terminal and OTP for an online transaction, but with rising digital payments vulnerability to cyberattacks and digital frauds has also been rising incrementally. Therefore even as we work towards promoting digital payments, it is also important that we strengthen the infrastructure to make it secure. Therefore now is the best time to infuse regulatory control as it will safeguard customer data and avoid digital frauds, especially in the case of gullible customers who often fall prey to data breaches. Users need to review all their recurring payments and register them with their banks by offering standing instructions to their respective banks. Consumers also need to be aware that the new guidelines will not impact any recurring transactions under UPI, AutoPay and e-NACH,” said Bajaj.

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