Google will stop on-boarding new recurring payment customers on its Android Play Store, as the Reserve Bank of India’s (RBI) new recurring payment rules come into effect from September this year. In an email to developers, Google said that free trials and introductory pricing should be removed from apps and from any user communication “until the ecosystem challenges are addressed.” MediaNama has seen a copy of the email.
Back in August 2019, the RBI issued a new framework for managing auto-debit or recurring transactions that are created through electronic mandates or e-mandates. An e-mandate is an electronic instruction to a bank/card issuer to debit a card or bank account for a specific amount every month towards a specific merchant or business. These are used for insurance payments, mutual fund contributions, subscription services and other recurring payment use-cases.
In its email, Google said that will also temporarily suspend free trials and introductory pricing for users in India. Lump-sum payment options (1 month or 12 months) for subscriptions will continue to be available on the Play Store, but customers cannot can’t sign up for a free trial or take advantage of introductory pricing without also signing up for an auto-debit subscription. The new payment policy will come into effect from May onward, Google said.
Since users cannot set up new e-mandates for recurring payments to apps on the Android Play Store, they will need to re-subscribe at the end of every month, it said. Google recommends developers replace auto-renewing subscription SKUs in India with one-time product SKUs and add in-app messaging that informs users that subscriptions will not automatically renew.
Impact of the RBI’s new e-mandate rules
Under the new model:
- Banks need to send pre-transaction and post-transaction notifications to customers before the auto-debit takes place
- Customers should be notified 24 hours prior to auto-debit and should have option to withdraw consent prior to the transaction
- All transactions above Rs 5,000 will need to follow this model for recurring payments
- Card issuers should provide a mechanism for customers to withdraw any e-mandate at any point of time
- Banks and card networks need to put in place dispute resolution mechanism for resolving customer disputes
- Any new e-mandate that is created would need to follow the new model
- Existing e-mandates may need to be set up again, as per the new model
Since complying with this new framework requires a fair amount of re-engineering on the part of banks, including getting the consent of existing e-mandate customers again, in March the RBI pushed the roll-out of the new system due to implementation challenges. “It is, however, noted that the progress of onboarding existing as well as new mandates of customers as per the framework is not satisfactory…Any further delay in ensuring complete adherence to the framework beyond the extended timeline will attract stringent supervisory action,” the RBI said.
If Netflix or MediaNama (as examples) currently have recurring payments set up for each of their users via cards, users will need to be sent a notification 24 hours before the expiry of their subscription. Thereafter, they would need to make the payment by physically entering card details.
With the apparent “regulatory preference” for UPI and BBPS over cards, “Merchants who use cards for recurring payments will push their users to use UPI for payments or they will on-board themselves as billers on Bharat Bill Pay,” a payments industry executive told MediaNama on the condition of anonymity. What doesn’t help is that “barring one or two players, no one has integrated UPI Autopay yet,” the executive said.
While there are other recurring payments platforms that can be used—Unified Payments Interface Autopay, Bharat Bill Payments System and the National Automated Clearing House—in place of card based e-mandates, companies will need to integrate and choose the appropriate platform for their service. For instance, the NACH system was designed for monthly loan repayments, insurance and mutual fund contributions and therefore, may not be suitable for subscription platforms.
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