In the last decade, India has made colossal progressÌýinÌýdigitization, especially in the world of payments. The RBI has played a major roleÌýby introducing initiatives that ensured convenience and security while making payments, and the latestÌýÌýissued on August 21, 2019, was no exception.
RBI's notification:
TheÌýnotification states that recurring transactions can beÌýmade using debit cards, credit cards, and prepaid payment instruments up to a total amount of Rs. 2,000, starting September 1, 2019.ÌýThisÌýpermission wasÌýgranted in response to appeals made by numerous banks requesting this function forÌýeasier transactions.
What has changed?
Prior to the notification, recurring payments viaÌýstanding instructionsÌýwere availableÌýonly for credit cards and bank accounts. Now, the customerÌýcan process an e-mandate to authorize merchants to debit money on a recurring basis.ÌýTwo-factor authentication (2FA) needs to be completed, but only during the first transaction.Ìý
Before we dig any deeper, let's start with the basics:
1.ÌýRecurring payments: These involve cash being debited automatically on a recurringÌýbasis after the customer gives permission to the merchant.
2.ÌýE-mandate: The e-mandateÌýis a consent form issued by the customer to aÌýthirdÌýparty to auto-charge a recurring fee from their bank account.
3.ÌýAuto-charge:ÌýThis is when a customer's card gets automatically charged as soon as an invoice is created.
The popularity of credit and debit cards:
Total card transactions and transacted amounts in India are on the rise.
Looking at the RBI's card statistics in IndiaÌýoverÌýthe past year, it's evident that credit and debit card usage is exponentially escalating. ThisÌýmeans recurring payments using cards will be a hit inÌýupcoming years.Ìý
Why do businesses prefer recurring payments?
What this means for your business:
This new announcement will benefit SaaS providers, rental services, membership and consultancy services, internet service providers, and subscription box businesses. Subscription businesses, in particular, spend a substantial amount of their time and effort on retaining customers. This new announcement will help prevent customer churn as well as making the subscription experience more convenient and secure, so it will be a big win for subscription businesses.
For businesses that use a traditional, individual-sale model, it's worth considering theÌýfundamental shiftÌýthatÌýhas already takenÌýplace in India's economy as more users shift towards usershipÌýrather than ownership.ÌýWith this new announcement offering an even bigger boost to subscription businesses, it is essential for businessesÌýthat function on the traditional model to venture into theÌýsubscription modelÌýto stay relevant and up-to-date in the eyes of their customers.Ìý
Overall, thisÌýannouncement is a clear green light for businesses to experiment and adapt to emerging trends by streamlining their payment collection process and promoting a secure and user-friendly experience.ÌýIt's easy to see that this initiative will be groundbreaking for businesses in India.
And if you're looking for a simple platform that can help you run your subscription business and handle recurring payments, check out ×îв©²ÊÍøÕ¾ Subscriptions.
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