the Reserve Bank of India (RBI), which came into force this month, disallowing customers from making recurring card payments without a one-time registration. Accordingly, an additional authentication will be required for standing instructions above Rs 5,000 ($67) on debit and credit cards. In other words, every transaction must be validated each month, 24 hours prior to the due date.
The move is believed to be aimed at protecting customers from merchants who don’t give subscribers an easy way to exit their plans. However, the new regulations have seen digital businesses helplessly losing customers in the South Asian nation. Although it has been a mere hassle for large enterprises, the guidelines have proven to be an assault on the very survival of small, bootstrapped ventures.
Over the recent years, smartphone wallets have emerged as a largely popular alternative cash, with these instantaneous online transactions growing from nothing six years ago to 4.5 times as large as card payment volumes. Therefore, the central bank’s new guidelines have unleashed chaos in India’s payments landscape, which gave the country’s pandemic-hit economy a badly needed boost over the recent past.
Nevertheless, the decision is not without merit, as merchants continue to exploit the booming online payments market. Therefore, experts note that the right question is, what could have been done differently to address this challenge?
“It’s often necessary for regulators to inconvenience those it’s seeking to protect — something we have come to grudgingly accept post-9/11 as we remove our shoes at airport security checks. But flights must still take off, and contractually agreed payments must still land,” Bloomberg Columnist Andy Mukherjee noted. “The RBI could have simply held banks as non-compliant — and taken a part of their revenue as fines — as long as they didn’t register their recurring payment e-mandates.”
