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Debit, credit card automatic payment rule to change from April 1: All you need to know

The central bank had earlier stated that recurring or automatic payments using debit cards, credit cards, Unified Payment Interface (UPI) and other prepaid instruments (PPIs) will need a mandatory additional factor of authentication from April 1. Here is all you need to know:

UPDATED: March 31, 2021 14:37 IST

The automatic or recurring payment facility for mobile recharges, utility and other bills is likely to be stopped from April as the Reserve Bank of India (RBI) has made an additional factor of authentication (AFA) mandatory after March 31.

The central bank had earlier stated that recurring or automatic payments using debit cards, credit cards, Unified Payment Interface (UPI) and other prepaid instruments (PPIs) will need mandatory AFA from April 1.

Under the new set of guidelines, banks will be required to notify customers in advance about any upcoming recurring payment and the transaction would then be carried forward after getting consent from the concerned customer.

According to a Business Standard report, leading banks have already started cancelling the service of e-mandates for auto-debit of funds from debit and credit cards. Many leading banks have already sent messages to their customer informing that they will have to manually transact for paying utility, mobile and other service bills.

Simply put, banks are not likely to deduct such fees automatically on behalf of the customers from April 1. Individuals either have to give consent to their bank before automatic deduction of charges or choose to pay it themselves.

The new rule is likely to impact your scheduled automatic payments for services such as mobile, DTH and utility bills. Other subscription charges for services such as Netflix, Amazon Prime, Hotstar and others will also be affected.

ALL YOU NEED TO KNOW

As per the RBI directive, automatic or recurring payments from debit and credit cards or wallets will require additional authentication from the customer. This means customers will have to give their consent before the bank can deduct any amount towards bills and other charges.

RBI said, “A cardholder desirous of opting for the e-mandate facility on the card shall undertake a one-time registration process, with AFA validation by the issuer.”

It may be noted that the limit for automatic or recurring payments from cards and various wallets has been set at Rs 5,000. However, an additional OTP will be needed for any amount above Rs 5,000.

As mentioned earlier, the new automatic or recurring payment rule will apply to all types of transactions involving debit card, credit card, UPI, PPI and mobile wallets.

ADDITIONAL FACTOR OF AUTHENTICATION

In a circular issued on December 4, 2020, the RBI had asked banks to introduce the AFA by March 31, 2021. It said, “Processing of recurring transactions (domestic or cross-border) using cards/PPIs/UPI under arrangements/practices not compliant with the aforesaid instructions shall not be continued beyond March 31, 2021.”

Therefore, the bank (issuer) has to send a notification to the customer before conducting any such transactions. It has to be sent by the bank/issuer at least 24 hours before the amount is debited from a customer’s card or wallet.

It is worth mentioning that the customer will have the option to choose the mode — either SMS or email — for receiving the notification from the issuer, prior to the transaction. Customers will also have the option to opt-out of the particular transaction after the notification is sent to them.

Sourcehttps://www.indiatoday.in/business/story/debit-card-credit-card-auto-payment-rule-to-change-from-april-1-all-you-need-to-know-1785466-2021-03-31

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