RBI Recurring payment mandate and SaaS

RBI Recurring payment mandate and SaaS

Subject: Economy

Section: Monetary Policy

Context:

Seven months after the Reserve Bank of India’s rule on recurring payment, small businesses and start-ups are still facing issues regarding timely payments to vendors.

RBI Recurring payment mandate:

As per RBI’s directive, there will be no automatic recurring payment for several services like utility bills, DTH, recharge of phone and OTT because additional factor of authentication (AFA) will become mandatory onwards.

Under new directives, banks will have to inform the customers using subscription-based recurring payments via credit or debit cards  in advance regarding the recurring payments due. Transactions will not be automatic but will be done after the customer has authenticated it.

Customers are required to follow a one-time registration process. After this process, further transactions can be performed without any additional factor authentication. Customers can provide the validity period for future transactions, while registering for the process.

Objective:

RBI had made additional factor of authentication (AFA) mandatory with the objective of making digital payments in India safe and secure. It also seeks to protect customers from fraudulent transactions.

New norms will not impact any standing instructions that have been registered using bank accounts for mutual funds, SIPs, equated monthly instalments for loans.

Alternative payment method:

Software as Service (SaaS)-

SaaS is a method of software delivery. The advantage behind this method of delivery is that data can be accessed with an internet connection, web browser in any device at any location. In this type of model, vendors host and maintain servers and databases. The main difference between SaaS Delivery and On-premise model is that SaaS deployments won’t require extensive hardware and the payment type is through a subscription model, no need to pay the entire cost upfront.

Some of the most famous examples of SaaS are:

• Amazon Web Services (AWS) – It is a subsidiary of Amazon. It provides around 150 services and has more than a million subscribers. AWS is even used by streaming companies like Netflix, defence organizations like the US Navy, and the world’s most famous space organisation NASA.
• Dropbox – Files stored in Dropbox can be accessed from any device, from any location at any time.
• Google Apps – Google drive enables employees to access files from any location from any device.
• Salesforce – It is a Customer Relationship Management (CRM) tool, enabling employees of organizations to access the required information from any device at any location.
• SAP Cloud Platform – Launched by SAP in 2012
• Microsoft Azure – Launched by Microsoft in 2010.