We missed this earlier: Netflix has started accepting UPI Autopay, it has emerged. The company announced the feature on August 30. Netflix is accepting Autopay via BHIM and Paytm for the moment, which means that if you want to pay via UPI, you can only do so through those two apps. Netflix has only accepted two payment methods in India since its launch: debit or credit cards, and postpaid bills of telcos or ISPs. UPI Autopay is a payment system announced last year by the National Payments Corporation of India that replicates the effect of recurring card payments with UPI.
This new option, though, came without much fanfare. And that is understandable — the company was likely forced by the Reserve Bank of India regulations to wean off its dependence on people paying with a credit card. The regulations are part of an undercurrent of government activity that is pushing customers towards homegrown ecosystems after decades of digital transactions in the country being powered by international card networks. Here’s why.
What did the RBI do?
Netflix may suffer a significant subscriber quantity setback by the end of the year in India, even with its new payment option. The RBI over 2019 and 2020 announced two new requirements:
- Framework for processing of e-mandates on recurring online transactions, August 2019
- Guidelines on Regulation of Payment Aggregators and Payment Gateways, March 2020.
The long and short of these rules is that they require banks to issue notifications to customers before and after a recurring transaction over Rs 5,000 is billed to a customer.
While these regulations will only come into full effect on September 30, and the minimum amount to which they will apply is higher than the price of most consumer-oriented digital services, they have already sent a few shockwaves through the industry: Google has stopped offering recurring payments on the Play Store and switched to a prepaid-only model for YouTube Premium in India. Even creators on YouTube around the world who have a paid subscription offer on their channel are currently unable to receive auto-debited subscription money from Indian customers. As such, payments for services like Netflix have been failing for some banks’ cardholders even before the RBI deadline, thus chipping away at the company’s India revenues and inconveniencing customers.
Banks are reeling too as they have to overhaul their systems in order to comply. Axis and ICICI Bank are simply letting all recurring transactions fail, forcing their customers to go and revalidate all their subscriptions on merchants’ websites. When the rules come into full force, banks may well choose to move even transactions below the Rs 5,000 mark into the same kind of consent dashboard as large transactions. There’s precedent for this; while transactions up to Rs 2,000 have been exempt from two-factor authentication for online transactions, few banks have dared to sidestep the requirement even for smaller transactions.
Moving Indians off (foreign) cards
The government and regulators have done much to undermine the perceived dominance of foreign payments operators, perhaps more than most countries (like China). The Unified Payments Interface as a bank-neutral portable payment network — an idea that generally rattles banks and established payments companies — was established and quickly marketed over the course of the last five years. RuPay was also established as a homegrown alternative to established card networks.
The government provides incentives to merchants (waivers on transaction fees), and private companies provide enticements to customers (cashbacks on transactions). But where there is a carrot, there’s also a stick. The Reserve Bank of India has been using its oversight powers in the payments space to tilt the playing field in favour of local solutions, even if that requires the policy equivalent of TNT.
The rules on recurring payments aren’t alone. There’s also the data localisation order, which requires card networks operating in India to store data on Indians’ transactions only in India. This startled the two biggest global payments network operators, Visa and Mastercard; an executive from Mastercard said in an interview that no country had required the company to delete its citizens’ data from data centres in other countries, even if some may have required that a copy of such data be available in the country itself.
And the RBI didn’t hesitate to use the proverbial stick: dissatisfied with Mastercard’s compliance, it prohibited banks from issuing cards on that company’s network for the foreseeable future.
The message to banks and customers could not be clearer: digital payments in India should rely on homegrown tech, with localised data, benefiting networks like UPI and RuPay, at the possible detriment of international operators like Visa and Mastercard.
- The Unintended Consequence Of RBI’s New Card Rules
- RBI Allows Recurring Payments Using UPI For Transactions Upto Rs 2,000
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