Snapdeal-owned digital wallet FreeCharge has taken a stab at trying to solve with recurring payments with its new feature called Auto Pay which will pay utility bills by deducting from the wallet’s balance. Users will have to set a due date for bill and will work for mobile recharges as well. Once the transaction is successful, a confirmation will be shared with the customer.
In case there aren’t sufficient funds in the Freecharge wallet, customers are reminded to add money to their wallet. However, loading the wallet through cards or netbanking will still have to have a second factor of authentication. On cards, users will still have to enter the OTP to load money on the wallet.
Wallets and payment companies have long been complaining about the Reserve Bank of India’s rule on second factor of authentication which hinders recurring payments in India as it compromises user experience. However, in May, the RBI removed the mandatory two-factor authentication for transactions below Rs 2,000 using NFC based credit and debit cards. But this was not extended to card not present transactions (i.e. for online transactions using cards).
It is interesting to note that FreeCharge has partnered with Axis Bank which will allow it to load money via the Unified Payments Interface (UPI). The UPI does allow pull-based transactions and will allow FreeCharge to keep standing instructions to pull money from bank accounts. Through the UPI, a user needs to only authenticate the transaction via an m-PIN.
However, the UPI is currently live with only 21 banks and money from banks which are not on the UPI cannot be loaded through this. For example, HDFC Bank, which is yet to release their UPI app and get on board the payments architecture, will not be able to send money to FreeCharge via Axis Bank.
Bottom line, lots to happen to make recurring payments truly ubiquitous.
In July, FreeCharge launched an escrow service for merchants, wherein the money is held within the escrow service until the product is delivered to the user. If the product is not shipped to the user, the money is refunded into the buyers wallet. As we had mentioned earlier, wallets route payments to different merchants through escrow accounts maintained in commercial banks anyway. These escrow accounts are treated as current accounts by the banks and used mostly for clearing payments.