🔍 RBI's New Payment Policy: A Failure?
RBI recently introduced rules to make online payments safer but here's why many merchants are unhappy with the move.
Sometimes even the best intentions can lead to disasters.
Something similar happened when the RBI introduced new payment rules last month.
The new rules state that automatic recurring payments (that we use for phone recharges, OTT subscriptions and other utility bills) will now be stopped. Customers will now have to register with their banks to restart these payments. Also, for payments above Rs. 5,000, the bank will have to send a message to the customers every time the payment is made.
To top it all, starting next year, merchants will be disallowed to save the card details of their customers!
Welcome back painful payments. But trust us, the vendors are crying more than you and me.
RBI’s Concerns
Many fake e-commerce websites have started mushrooming off-late.
These websites lure customers with attractive offerings. Once the customer lands into their web, they mandate them to share their card details for transacting. After a couple of months of genuine operations, these websites commit fraud and disappear into thin air.
Yet another set of platforms made it difficult for customers to stop auto-debits and were misusing the recurring payments system.
Funnily enough, these recurring payments were never really allowed in the first place! They always operated in the grey zone.
Now with the increased risk of gullible customers losing their money online, RBI had to finally step in. The new rules would make sure that the customers are aware of all the payments they are making. They would also prevent any accidental or fraudulent payments. Sounds like a noble intent, no?
If only it were executed that well.
In RBI’s defence, they kept on giving tareek pe tareek. They had initially planned to roll the new rules out in August 2019 but eventually pushed the plan to September 30, 2021.
One month down: How’s the new law holding up?
With all the pandemic related fire-fighting, banks could not prepare for D-Day. They secretly hoped that the RBI would push the dates again. But this time RBI was determined to not budge.
It implemented the law that barred automated recurring payments.
The result: On October 1, 70% of scheduled recurring payments failed and many such payments are still failing. Many customers still don't fully understand the issues with their recurring payments and have not taken any action to solve them. And many of those who do understand do not want to take the time or effort.
Well, wherever there is adversity, someone sees an opportunity and that someone is usually a startup. In this case, India's biggest payments platforms like BillDesk, Razorpay and PayU started building portals that would help banks implement the new rules. They provided tech support to the banking system, allowing banks to easily send messages to customers ahead of upcoming payments.
While banks were still dealing with this, the RBI announced that from January 2022, no e-commerce platform or merchant will be allowed to store your card details. And while this is a great idea as it protects you from fraud, consider this: every time you buy something off Amazon, or order food from Zomato, you will have to enter all your card details.
This may not seem like a lot of work now, but we are lazy. And you know that. This laziness will make us abandon or postpone our impulse purchases. Welcome back more savings. But this will adversely impact many e-commerce platforms like Amazon, Flipkart, Swiggy, Zomato and more importantly the small online businesses.
Well, RBI has a solution for this as well: Tokenisation of cards. What's that?
Simple. It allows merchants to save your card without saving its details. Now any time you make a purchase with your card, a merchant or a platform will ask you for your permission to tokenise it. This means that your card details will be saved under a special token that doesn't contain any of your personal information. So, there are no chances of any fraud and you will not have to enter your card details again as well.
But, and there's always a but, the process will be difficult to implement. This has made many banks and e-commerce platforms, who have already gone through the grind while implementing the recurring payments rule, very nervous.
Implementing tokenisation will also be expensive. Experts estimate that it will increase the cost of a card transaction from a few paise to Rs.6-7.
And it's not just the banks and merchants who will be affected. The increased cost of tokenisation will find its way to customers like you and me.
Also, remember those discounts that you get just for using a card from a particular bank? Yeah, they could pretty much be gone after tokenisation. Since the e-commerce platform will no longer be able to access your private details, they won't know which bank has issued your card. As we speak, the RBI is looking into this matter.
The online merchants are calling these new measures Demonetisation 2.0. All are suffering because of the actions of a few. While the technology will fix the flow of transactions, will it be able to retain customers?
While the RBI’s move is principally in the right direction, is it being too ambitious?
Well. Only time will tell. Until then, ReadOn.
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