Recurring payments have finally come to Paytm, with the wallet allowing recurring payments for all Visa and Mastercard credit cards, and ICICI Bank debit cards. Users will be able to authorize automatic loading of money from a card to the Paytm wallet. This feature is being introduced initially for Android devices, and will be launched for iOS later.
In India, this has historically not been done because of the second factor of authentication requirement adds an additional layer of friction to the transaction. As we had mentioned before, users end up thinking again about whether they really need this service, or they deprioritize the decision to make the payment and hence drop out.
They are done by issuing standing instructions with a bank either by a merchant (Paytm in this case) or payment gateway. So far, payment gateways such as CCAvenue, Razorpay and Techprocess offer these kind recurring payments through cards.
Nikhil adds: Each instance of filling money into a wallet is a unique instance of a decision from a consumer: how much money do I need to put in? How much should I put in now and how much later? Should I put in enough money for the next few days, a week or a month? Recurring payments take that decision making out of the picture, and reduce the friction involved in making payments via Paytm. Remember that historically, each instance of filling money in the wallet has historically involved going through the process of being taken to a bank gateway (on a potential unreliable mobile Internet connection) and authenticating the payment using a 3D secure/VBV password, or a mobile “one-time password”.
Note a user complained that the feature does not work on Axis Bank’s credit cards. But for now, it does not support a majority of the debit cards. That might be because of the scale of potential liability related to debit cards. Remember that credit cards have a limit and beyond that customers can’t use them. And as such, they are sort of a virtual currency. But debit cards are linked to bank accounts and has a customer’s cash.
Axis credit cards not yet supported? pic.twitter.com/g3RFFuorCi
— Raveesh Bhalla (@raveeshbhalla) August 8, 2017
Customers do get a message from their bank once money is deducted from a card in case of a disputed transaction.
— Kabir Uppal (@kabiruppal) August 7, 2017
Authorization on Paytm is not explicit
While performing a recurring payment transaction, a customer has to give a consent authorizing the transactions. In other recurring payments, such as CCAvenue, it clearly mentions that they are giving consent to not get an OTP. The first transaction that is processed follows two-factor authentication.
However, Paytm does not explicitly take consent from customers and says that it will perform the first transaction for “verification”. Recurring payments through cards is relatively new in India and it would be wise for Paytm to make sure that customers know what they are signing up for. Perhaps a tick box which tells the customer the same will be helpful.