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Debit card, credit card auto-payment: What are the big changes?

Debit card, credit card auto-payment: What are the big changes?

The Reserve Bank of India's (RBI) new diktat is only for debit or credit card standing instructions given or registered with the third party service providers directly for OTT payments, utility bills, subscriptions without involving the banking platform

Let's get the facts straight. Your auto debit payments for home loans, utility bills and other recurring payments registered with banks will not see any disruption from April 1, 2021. The Reserve Bank of India's (RBI) new diktat is only for debit or credit card standing instructions given or registered with the third party service providers directly for OTT payments, utility bills, subscriptions without involving the banking platform.

So far, these recurring payments up to Rs 5,000 were getting debited without getting any additional factor of authentication (via SMS or email) from banks. These third party payments now require proper registration to protect the interest of card holders. The banking system especially the private sector banks are already ready for integration, but the service providers like OTT players or app-based fintech players are not ready with the technology integration as the e-mandate information has to flow from the service provider to the bank and vice-a-versa. Here is the process for giving e-mandate:

One Time Registration

There is a one time registration process with the service provider for giving e-mandate facility on debit or credit card, which will go to the bank for registration from April 2, 2021. This involves basic details like validity period of the e-mandate, fixed or variable amount of recurring payments, mode (SMS or email) of receiving the intimation, option for cancelling the mandate anytime. The additional factor authentication via SMS or email will be compulsory for the first transaction or payment.

Pre-transaction intimation

The customer will get a pre-transaction notice a day in advance which will have the amount, service provider name, date and time of debit, reference number of transaction, reason for debit. This will help customer to know the details in advance about likely payment from his or her card.

Option to opt out of standing instruction

This is important as often customers are charged owing to standing instructions on credit or debit card despite discontinuing services. This also leads to dispute where the customer has to run around for refund. Customers will now have option to opt out when they get a receipt of the pre-transaction notification. The moment a customer says 'no' to any such standing instruction, the additional factor authentication will get triggered for such a transaction. He or she may recheck with the service provider and, if satisfied, pay the amount by punching in the authentication code received from the bank.

Post transaction compliance

There is also a requirement to send details of post transaction alert to cardholder which will include the name of the service provider, transaction amount, date and time of debit, reference number of transaction.

Withdrawal of e-mandate

At any point of time, the service provider will have to provide the cardholder an online facility to withdraw from the given e-mandate. The additional factor authentication process will also kick in at the time of the withdrawal. The RBI has clearly stated that when a withdrawal from the standing instruction takes place, the service provider has to delete client's information including card number and payment details.

Dispute resolution and grievance redressal

Finally, the RBI has provided for a dispute resolution and grievance redressal system where the bank and the service provider creates a platform for lodging a grievance and also resolving the dispute within a time frame. The RBI plans to monitor the turnaround time of handling such disputes.