The Reserve Bank of India (RBI) on Wednesday extended the deadline for implementing the Additional Authentication Factor (AFA) system for processing recurring online transactions until September 30. As a result of the extension, banks and financial institutions will have additional time to migrate to the new structure that the central bank originally announced in August 2019. Gadgets 360 learned that merchants through various industry bodies urged the RBI and the government to maintain the proposed system, as it was believed to stop automatic payments for cell phones, utilities and other over-the-top (OTT) platform accounts and subscription fees.
Citing the delay in implementing the new structure, the RBI said in a press release that it had decided to extend the deadline by six months.
“The delay in implementation by some interested parties generated a situation of possible inconvenience and default on a large scale for the client. To avoid any inconvenience for customers, Reserve Bank decided to extend the deadline for interested parties to migrate to the structure by six months, that is, until September 30, 2021, ”said the central bank in the statement.
He also warned that any additional delays in ensuring full adherence to the structure beyond the extended schedule would attract strict supervisory action.
RBI initially issued the framework to deploy AFA for recurring transactions in the amount of up to Rs. 2,000 in 2019. However, it extended this rule in December last year to transactions up to the limit of Rs. 5,000 per transaction and informed banks and other interested parties that the migration to the structure would be necessary by March 31.
In December, the RBI notified all scheduled commercial banks, card payment networks, issuers of prepaid instruments and the National Payments Corporation of India (NPCI) to inform them of the structure and its term.
The implementation of the framework is designed to help bring more security to online transactions in the country. According to the decision, banks and payment platforms were required to send a notification to customers at least 24 hours before the first transaction was debited. The notification can be sent by SMS or e-mail – depending on the way the customer chose when registering the e-mandate for recurring transactions. Basically, the customer’s consent will be required to proceed with the first transaction. In addition to a notification for the first transaction, customers would have to provide their authentication when registering, modifying and revoking the e-mandate.
It is important to note that the structure was initially applicable to card and wallet payments, although it was extended in January last year to also cover unified payment interface (UPI) transactions.
Several industry sources confirmed to Gadgets 360 that major banks have not yet implemented the system to enable AFA for recurring transactions.
It was expected that the delay in implementing the structure compatible with the electronic mandate would interrupt automatic payments for a large number of customers. People familiar with the development told Gadgets 360 that the industry in the country processes approximately 10 million recurring transactions worth Rs. 1,600 crores per month. This includes automatic payments from your cell phone, utilities and other accounts, as well as payments you make for your over-the-top (OTT) subscriptions.
“All of these transactions would be canceled if the new structure went into effect according to the previous schedule, because banks have not made major changes to their ends,” one of the industry sources told Gadgets 360.
Instead of working for the new structure, banks began to notify customers that they would not be able to process recurring transactions. The goal was to direct customers to make manual transactions to avoid problems and delays in regular payments.
In a letter from the Payments Council of India (PCI), which is part of the Internet and Mobile Association of India (IAMAI), requesting an extension of the deadline for compliance with the NITI Aayog, as seen by Gadgets 360, the payments agency said more the main Regular commercial banks did not have the updated capabilities to meet AFA requirements for recurring online transactions and the cost of such non-adherence would be borne by the customer and the merchants who use these transactions.
“The technical effort for this integration is enormous and extends to changes in the technology system, changes in the data exchange process, changes in the underlying commercial contracts and subpoena to customers,” says the letter, requesting six months for entities such as merchants and payment aggregators (PAs) to adopt new processes.
A Paytm spokesman told Gadgets 360 that the structure would give customers more control over regular subscription fees and bill payments.
“We have already implemented the framework in which we will inform our users in advance of the recurring payment due and the transaction would be carried out only after their approval. We will also launch additional OTP for any transaction over Rs 5,000,” said the spokesman.