Simplify recurring payments in India for businesses
A few years ago, it was peaceful when we had either free or paid versions of desktop applications. And then the SaaS era changed things forever. Some game changers include Netflix, Spotify, and Canva.
Consumers opted for automatic monthly subscription payments where money got cut automatically. They use their credit and debit cards which get stored in vendors’ invoicing software.
Though this is not new, RBI suddenly decided to regulate this and simplify recurring payments in India.
The recurring payments landscape in India
Indian consumers aren’t new to the term ‘recurring payments. Both in B2B and B2C spaces, recurring credit card payments have been consistently made.
To talk about B2C, it’s not just entertainment and streaming platforms like Netflix, YouTube, and Disney, but also membership-based subscriptions also use recurring payments.
It can be a gym membership, magazine subscriptions, or even learning platforms that have employed recurring payments on cards in India.
In order to get this recurring payment activated, the customers will be taken to the AFA (Additional Factor Authentication) page as they provide their card details. Every month, payment gets automatically deducted from the credit/debit card, and the customer receives a notification.
This made SaaS companies grow exponentially, and customers had less control over whether their subscriptions continued (Just remember how Chandler from Friends muddled through when he couldn’t cancel his gym membership).
But RBI had problems with this and came up with a new mandate. Starting from October 2021, SaaS businesses are required to send a notification to their customers through their bank before they proceed with next month’s subscription.
Customers can click on that link, enter an OTP, and fulfill the payment. Banks should trigger this notification 24 hours before the payment is due. If customers don’t finish this process, their subscriptions will be suspended.
This works great for the customer, but several OTT platforms and cloud-based solutions faced a hit as their regular customers opted out abruptly. It’s only the recurring payments on cards in India that have been restrained.
Customers can still go for UPI autopay options through Razorpay or other payment solutions.
International merchants are highly upset with this change in payment mode mandated by RBI. It is a challenge for them as they have to find alternate ways to maintain their current customer base in this potential market.
Importance of recurring billing for B2B companies
The era of remote working has welcomed many cloud-based services to support the workforce in sustaining productivity.
These companies had no problem going for automated, recurring credit card payments as they couldn’t afford to discontinue the service. It’s a win-win for both businesses as one retained customers, and the other one enjoyed their subscription continuation.
Retaining customers is more important than acquiring new customers or capturing a new market. Recurring billing has worked wonders for them to provide continual and comfortable customer service.
When business customers wait for a long time to get their billing issues resolved, they get frustrated and start looking for different options.
Businesses also found that recurring billing has benefited them in many ways. Instead of wasting time on receiving invoices, making payments, and chasing receipts, the money is automatically withdrawn from their account.
It saves a considerable amount of time for business owners; if they don’t want it, they can cancel it anytime.
With recurring payments on cards in India, it’s easy for B2B businesses to project their revenue for consecutive months closely.
It affects B2B companies the most that offer subscription-based services/products as it affects the major selling point, which is convenience and automated payments.
The early recurring payments challenges
What seems to work best for someone is not seen the same way by others. Recurring payments may work best for companies that provide SaaS services. But it also has its downsides.
1. Payment failures
In automated payments, payment failures can be very common due to banking or other reasons.
There can be instances where a customer’s card might get blocked temporarily or have insufficient credit. In this case, the payment gets declined. The seller should wait for another week to receive the payment.
Or the customer should choose a different payment mode to make the payment. This creates disruption for both. Since it’s a recurring credit card payments method, the customer is also not prepared
If the card expires and the customer gets a new credit card, they will have to update the card details on the platform. Delayed recurring payments happen in untimely moments that can be bothersome to customers and their budget plans.
2. Lack of dual authentication
Recurring payments on cards in India happen consensually, and the customer agrees to terms and conditions. But the lack of multiple or even single authentication when the payment gets cut off can worry anyone.
In times when money thefts are at their peak, a sudden payment withdrawal notification can cause a momentary ruckus. On top of that, recurring payments instill a fear that what if the sellers’ data gets compromised?
How new mechanisms of mandates simplify recurring payments
RBI has banned automatic payments in India as they don’t comply with their regulations. But, they have also been making efforts to simplify recurring payments in India. Here are the alternative and safe payment mechanisms that are suggested for businesses that can simplify recurring payments in India.
1. eNACH
The full form of this is Electronic National Automated Clearing House. NPCI controls this to simplify recurring payments in India and made this available in 40+ banks in India.
They have combined electronic clearing systems that banks have previously created to launch this. This electronic process helps banking and non-financial institutions in automating recurrent payment services.
To use this service, individuals can check their eligibility and register with any of the available banks.
Eligibility
The user must have a debit card or internet banking facility in a bank that accepts net banking as a payment method. The user can check with the nearest bank if this facility is available and open an account.
How to register for eNACH service?
The user should fill the eNACH registration form with details including name, contact details, payment frequency, start and end date of payment, bank account number, and amount to be debited.
After verification of email address and phone number, the customer must go through the personal verification on the bank authorization page. Once the registration process is over, the bank will withdraw a particular amount from your account.
In case of recurring payments through debit cards, the user will be verifying card details and pin instead of this.
2. ECS mandates
ECS mandates or Electronic Clearing Systems mandate is similar to eNACH to make recurring payments on cards in India. The eMandate is owned and controlled by RBI through NPCI.
Individuals and organizations make use of this system to make recurring payments like salaries, dividend payments, pensions, loan installments, and many more.
Right now, it’s available only in 4 to 5 banks in India. ECS mandate or eMandate is an instruction that a bank receives to withdraw funds from the account holder's account.
One can check with their bank to avail eMndate service. You can use both eMandate and physical mandate services. eMandate is fully digital, whereas physical mandate involves filling up manual forms.
To be eligible for eMandate, a user should have a bank account and Aadhar card. And they must have linked the bank account and mobile number with the Aadhar card.
How to register for eMandate services?
• Fill out the mandate registration form with the personal and banking information and recurring payment details along with the purpose of the payment.
• They should verify their phone number and email address. And then, they should verify using net banking or debit card.
3. UPI AutoPay
The UPI launch by RBI has been a godsend to many as it has modernized payment systems in India. Launched in 2016, UPI has laid the foundation for contactless payments in India.
UPI is the backbone of many payment applications we use today, like GPay, PhonePe, and PayTm. UPI is a mobile-based platform that allows you to transfer money up to 1lakh from one account to another instantly.
The supremacy of UPI is that it doesn't need one’s private banking information. With the UPI id or scan code, you can send money to someone.
Anyone with a bank account and/or a debit card can set up their UPI account on the BHIM UPI app or other apps that UPI backs.
To simplify recurring payments in India, UPI lets you enable eMandate and make OTT or other app subscription fees, loan dues, and other monthly payments through UPI.
But this automatic payment withdrawal is possible only for monthly dues within Rs.5000. For higher amounts, one must execute with the UPI pin every month.
How to set up recurring payments on BHIM UPI?
• Open the UPI app and go to the auto debit option.
• You can see the mandate option enabled here. Either with the recipient’s UPI ID or QR code, you can initiate recurring payments. There are options to make the payment once, twice, weekly, bi-monthly, monthly, quarterly, half-yearly, and annually.
• Once you select the payment date when the money should be debited, you can set up recurring payments on cards in India after successful authorization.
4. Credit cards - Recurring credit card payments
Recent RBI’s move made a significant impact on recurring payments on cards in India.
That move was increasing the monthly due limit of recurring payments from Rs.5000 to Rs.15000 to simplify recurring payments in India and to improve customer convenience
Customers felt delighted as they could schedule their small recurring payments like Netflix fees through credit cards without prior authentication.
Recurring credit card payments work well for many as credit card statements are the way to track unorganized payments from one place.
It only takes seconds to set up recurring payments on cards in India. All you need is your credit card data and an OTP verification. Credit cards use eNACH and eMandate methods to execute recurring payments
Comparatively, credit cards are the safest option to make personal and b2b business payments and also have options to revive payments and report phony incidents.
Growth for subscription-based services
The recurring payment ecosystem market is growing by leaps and bounds in India despite the rigid measures laid down by governing organizations.
The number of people with bank accounts and mobile banking services is constantly growing. They are also willing to learn and upgrade themselves to modern payment systems that are convenient to use and safer in general.
And recurring payments are the solution that satisfies both. It works for businesses that want to scale up their business and retain their customers in every possible way.
Observing the potential, Many companies are shifting their focus from offering fixed payment services to monthly or annual payments. The monthly recurring payment limit has been set to Rs. 15000.
Hence, it’s easy for both B2B and B2C services that are lesser expensive to culminate recurring payments on cards in India.
Only in certain cases of B2B payments where the monthly due crosses the allowed limit are in the position to think of alternative payment methods.
The only drawback of higher subscription payments is that they require AFA to get processed every month. When customers really find the product desirable, they don’t mind going through this additional step or being mindful of payment dates.
But for the rest, the near future looks bright and hopeful when looking at the aspect of revenue collection.
Furthermore, to simplify recurring payments in India, there are many non-banking financial companies involved in the act. They work for both individual and business users to facilitate automatic payments on time to avoid service disconnection.
With bigger and bigger banks making eMandate an available option, it becomes easy for service providers to adopt business models based on subscriptions.
Enable automatic recurring payments for your business
If you are running a business in India, you would have keenly sought modern payment solutions to systematize your recurring payments.
Even if the mandates are relaxed, it can still affect business payments and not let them have a single payment platform to send out all their payments.
To simplify recurring payments in India, Volopay offers unlimited virtual cards to schedule and manage your monthly subscription bills.
You don’t have to use a single card for all your payment needs; create different cards for different applications. Your payment goes out every month on a predetermined date, and you can see how much you have spent in a single place.
Volopay corporate cards are the best way to make recurring payments for your business and waiting for good. Achieve subscription management and accounting automation with Volopay.
Discover the power of virtual cards with our article on virtual card use cases. Explore the versatility, security, and efficiency of virtual cards in streamlining payments and boosting business growth.