New auto debit rules affecting monthly subscriptions

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The new auto-debit rules, introduced by RBI, effective from October 1, can affect the monthly renewal of subscriptions made to OTT platforms such as Netflix and Amazon Prime.

Recurring payments made by the banks on the standing instructions of the customers should be notified to the customers a day before the auto payments get generated. The customers need to manually enter OTP sent on their phones to confirm these payments.

The new regime has curtailed down alternative payment solutions offered by large merchants. Like Amazon has ceased its ‘free trials’ for Prime subscriptions due to the interruptions and frictions in the auto payment system.

Netflix has urged the customers to reset payment modes, an option provided by them is ‘AutoPay’ available on UPI.

Apple is prompting people to add balance in their Apple wallets so that the subscription payments continue, and customers receive uninterrupted services.

Google, YouTube and Facebook are asking customers to add a new payment method that is compliant with the RBI.

Many software service providers, media platforms and telecom companies are also getting impacted. Many corporates and MSEs also make payments through the automatic deduction route.

The RBI rules are beneficial to customers as they ensure transparency and control over their billings. The auto-debit process will get generated only if a pre-debit notification has been sent to the customers before 24 hours. Customers need to authenticate the payments by entering an OTP that they receive on their phones. 

RBI has put the responsibility on the issuing banks to send repeated reminders to the customers. The process has become complicated because it is between the merchants, overseas parties and the banks.

The top private banks, ICICI Bank, Axis Bank and HDFC Bank, are working to comply with the new norms by partnering with BillDesk and Razorpay. But it is still unclear if these banks have gone live with the merchants for recurring payment mandates.

Many merchants do not want to rely on banks for a smooth flow of transactions because the final call to make the payment is in the hands of the banks which, are not fully equipped to adhere to the new guidelines, causing a lot of transactions to fail.

The service providers might lose customers because people could shift towards other modes of payments like UPI. 

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