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Update: In a phone conversation, Praveen Samariya, the cofounder of AHA Taxis, said that the PayPal payment option was only meant for international users, since RBI’s guidelines did not allow for digital payments without a two factor authentication in India. He said that Indian users would get an error if they tried to pay through PayPal and sent us a screenshot of the same:

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We’ll get in touch with PayPal and update this story once the company responds.

29 July: Online intercity cab aggregator AHA Taxis has partnered with PayPal to integrate the PayPal payment gateway within AHA Taxis’ apps on Android, iOS, Windows and mobile and desktop web. Last month, AHA expanded to 20 cities and towns and now claims to be present in over 350 cities in the country.

The PayPal integration is targeted especially for international users in India and will let them pay through their own currency, but it is, by default, available to all of AHA Taxis users, including Indians. AHA Taxis claims that 20% of its business in the country comes from international users.

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Concerns over two factor authentication
We think that this is a great move for all users, given those who have an aversion to cash or disclosing credit/debit card information. However, we’d also like to point out that AHA Taxis is very likely violating the  Reserve Bank of India’s (RBI) guidelines for ‘card not present transactions’ which mandate that there should be two-factor authentication for card payments online and that settlement of transactions should be made by an Indian bank. We’ve contacted AHA for more details and will update this once we hear from them.

Related read: Netflix is violating RBI’s two-factor authentication and forex rules for payments

Payments on other cab services:
– Uber has been working on a closed mobile wallet service in India, stating that the RBI’s two factor authentication for card payments was cumbersome. As of now, Uber users can pay for rides through Paytm, Airtel Money, debit and credit cards, and cash.
– Competitor Ola too had a closed wallet but ran afoul of the RBI’s guidelines and tied up with ZipCash for its wallet services which also allowed Ola Money users to pay for other services such as OYO Rooms, Saavn, Lenskart, Zo Rooms and TinyOwl.
– In October 2014, Meru Cabs released an in-app prepaid wallet in a tie up with Citrus Pay to offer cashless taxi rides.

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A history of how two factor authentication came into play in India
Readers would remember that the RBI’s two factor authentication came into play in 2014,
– when in July, Meru Cabs asked it to extend its recurring billing guidelines to foreign players like Uber as well, thereby creating a level playing field among domestic and international players.
– A month later, the RBI issued a directive that entities which route online billing internationally for goods and services purchased online using Indian cards, needed to include a second factor of authentication, and route transactions through a bank in India.
– In the same month, Meru Cabs CEO Siddhartha Pahwa mentioned that the usage of foreign payment gateways violated both RBI guidelines and FEMA rules and noted that Meru was ready to launch a similar mobile app without the two-factor-authentication a long time ago, but decided against it since they wanted to follow “the laws of the land.”
– In October, the RBI extended the deadline for Uber to comply with its two-factor authentication rules, till the 30th of November.
– In December Uber, which then exclusively integrated Paytm’s prepaid wallet with its service, pitched for a 45-day extension of the deadline to comply with the RBI’s online payments rules.
– In May 2015, Uber introduced cash payments in India starting with Hyderabad.
– In July 2015, Uber resumed payments via credit cards in India after 9 months of stopping to do so, after the RBI’s concerns with two factor authentication.
– In August 2015, Uber introduced payments via debit cards across its then 18 operational cities in India. In the same month, it tied up with Airtel to let its users pay by Airtel Money.

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Also read: The case that changed online cab aggregators in India: a timeline

Our cab aggregators and digital payments coverage.

Image Credit: Thomas Hawk under CC BY NC 2.0