The Reserve Bank of India has mandated new rules for how recurring subscription payments are handled for Indian credit and debit cardholders. The new rules that went into effect today require that cardholders have the opportunity to review and approve any recurring subscription bill amount over 5,000 INR (~$67 USD). Prior to posting the transaction, the card issuer must obtain approval from the cardholder via a separate SMS or email notification, e-mandate, or additional factor of authentication (AFA). The new rules were brought about by a reported increase in complaints from consumers that recurring billing for subscription services were difficult, or in some cases, impossible to cancel.
The Reserve Bank of India said in the original circular in 2019, that the framework was designed to serve as “a risk mitigant and customer facilitation measure,” adding that the issuer processing such transactions “shall send a pre-transaction notification to the customer, at least 24 hours prior to the actual charge by SMS or email, as per the customer’s preferences.”
The rules were originally slated to go into effect in April of this year, but were postponed until today after the bank received feedback from issuing banks, merchants, and processors that they needed more time to implement the new rules.
“Until legislation catches up, regulation has to adapt to ensure that the financial system absorbs digital innovation in a non-disruptive manner,” said RBI Deputy Governor T Rabi Sankar at a conference earlier this week. “We would only be able to reach a thriving and mature payments system if, over time, all stakeholders attach due importance to long-term improvements over short-term gains and internalise mature practices like informed consent and transparency of data usage.”
Although designed to protect consumers, the new rules have left many cardholders frustrated, as captured in this Tweet: “It’s a pain to use any subscription product in India, not all cards work and random rules at banks.” Some merchants have converted their recurring billing model to a subscription model, emailing customers with a link to a payment page where they can pay their subscription fee each month. Global merchants like Netflix also need to decide whether to implement an India-only process, or chage their architecture to allow for similar changes that might be on the horizon in other regions.
Overview by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group
