The recurring payment collecting method in India has drastically changed since the introduction of e-mandates in 2018. E-mandate has simplified and made it much easier for lenders to collect recurring payments with a much reduced operational costs.
So, what is this E-Mandate that almost transformed the recurring payments landscape in India? Let’s dig a bit deeper to know what it is, how it works, its benefits and the new guidelines set by the Government.
What is e-mandate?
A mandate is a standing directive that an individual gives to an issuing bank to allow them to automatically debit a certain amount from his or her bank account. E-mandate refers to the electronic form of mandates.
How it works?
E-Mandates are designed to eliminate the hassles of paying and collecting recurring payments for individual and the businesses. It saves the time and hazards that lies in sending reminders to the payers and asking for penalty charges every time they miss the due dates.
Businesses have been collecting recurring payments such as SIPs and insurance premiums, for a very long time. However, the procedure was previously permitted through a physical document that the end-user had to fill out and sign. E-mandate and e-NACH made the entire process of recurring payments simpler and easier. With e-mandate, businesses can auto-debit the customer’s account at the start of every billing cycle with just one-time digital authentication.
Benefits of E-Mandate
Since its inception, E-mandate has aided various industries in implementing the recurring payment model. Some of the primary benefits of E-mandates are listed below:
Continuous cash flow and seamless payments process:
You can use e-mandate to auto-debit consumers’ bank accounts with regular payments. As a result, there is less hassle in the payment process, as users do not need to log in to your website or app on a regular basis to make payment. E-mandate also ensures that your company’s cash flow is predicted and consistent.
Simple and easy E-mandate set up:
E-Mandate set up process is simple and quick. Businesses only need the clients’ bank account or credit card information to register them for recurring payments according to the product or service plan they have chosen.
Enhances customer loyalty:
With e-mandate, auto-debiting the customer’s bank account is possible with one-time digital authentication. It allows your customers to enjoy the benefits of uninterrupted access to your products or services. Moreover, it enhances customer retention and builds a loyal consumer base.
Auto-reconciliation:
The majority of transaction details are tracked and captured online. This saves time, effort, and money on purchasing and maintaining different monitoring tools.
Reduces operational costs:
With e-mandate, the amount is auto-debited. So, the businesses do not need to chase the customers for the payments. This reduces the company’s operating effort, invoicing work, and expenses.
New RBI guidelines for e-mandates
RBI has issued new guidelines for e-mandates to protect customers’ interests in recurring payments. Recurring transactions done with any sort of card – credit, debit, Prepaid Payment Instruments (PPIs), or even wallets – are now subject to the Additional Factor of Authentication rules (AFA).
It means that banks will not authorise any e-mandate for recurring transactions unless the RBI has approved it.
You should also be aware of the following aspects concerning the recent RBI e-mandate guidelines.
- Two-factor authentication is mandatory irrespective of the amount being processed
- For transaction amount above Rs. 5,000, the end-users’ card will be charged only after he/she gives consent for the same
- He/she will also receive a notification 24 hours prior to the debit
- The guidelines are applicable for all categories of merchants that accept recurring payments based on e-mandates
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