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Apple to stop accepting credit and debit cards in India

Two new RBI regulations have resulted in this situation.

Source: Apple email to customers

Owing to the onerous Reserve Bank of India (RBI) regulations, Apple will stop accepting credit and debit cards for purchases or subscriptions on the App Store or other Apple services in India from June 1, the company said in an email sent to customers. “Apple will no longer store card information on file — protecting your payment method is our top priority,” the email states.

To avoid interruptions to subscriptions and other purchases, Apple has advised customers to do the following:

  1. Add UPI or Net Banking as a payment method
  2. Add funds to Apple ID balance

The above process indicates that the only way to pay for subscriptions is through funds in Apple ID balance. “Your subscriptions will continue as long as you have a sufficient balance. If you are an Apple Music, TV+, iCloud+ or third-party subscriber and we cannot renew your subscription, your subscription will automatically expire,” the email reads.

If a company with the resources of Apple is finding it difficult (or unnecessary) to comply with the new RBI regulations, it’s telling that the negative consequences of these regulations on smaller companies will be immense.

What are the new RBI regulations?

There are two new regulations that have resulted in this situation:

  1. Auto-debit mandatesCustomers will need to use two-factor authentication and set up a new e-mandate for recurring payments such as subscriptions. Then, for each recurring transaction above Rs 5,000, users will receive a message from the bank 24 hours before processing the transaction. The user will have to approve the transaction through a multi-step process. For transactions below Rs 5,000, users will still be asked if they wish to cancel the upcoming transaction or not. This regulation has been in effect since October 1, 2021.
  2. Card tokenisationMerchants are not allowed to store customers’ debit or credit card numbers and instead have to replace them with token numbers, which will be unique for a combination of card, token requestor and merchant. This regulation will go into effect from July 1, 2022.

Essentially, companies that wish to enable recurring transactions using credit and debit cards must implement systems to comply with both the regulations explained above. While companies are still struggling to comply with the first regulation, which has been in effect for seven months now, the second regulation is expected to kick in.

Will recurring payments ever be seamless again?

The regulations affect all companies, but they mainly affect foreign businesses that serve Indian users. For them, complying with the new regulations is not a walk in the park because they will now have to tie up with some payment company in India that is compliant with the regulations or implement the necessary infrastructure and processes to comply with regulations themselves. Both of these options pose an extra burden and cost that might even make some companies quit serving Indian consumers altogether.

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But complying with the regulations is only the beginning of the troubles because it doesn’t necessarily make the recurring payments process seamless like it was before the regulations:

Here’s a Twitter thread by Rohin Dharmakumar, which walks you through the elaborate process to authorise each recurring payment on Slack (summarised in the diagram below).

Apple had earlier advised Indian customers using Apple Search Ads to use foreign cards for payment instead:

According to a report by The Ken: “So far, about 29 banks have complied with the rule change, covering 70% of credit cards and 50% of debit cards in India. However, compliance doesn’t guarantee successful recurring transactions. Success rates have varied from 30% to 75%. […] One senior executive at a payment aggregator said that 100% of international payments have failed since October, as merchants abroad are finding it too cumbersome to comply with Indian guidelines.”

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