eNACH Mandates: Unlocking The Recurring Payments Economy in India

On 24th April, The Reserve Bank of India issued final approval for eNACH Mandates via Internet Banking and Debit Cards.

eNACH mandates — the digital version of the older paper-based NACH mandates — allow users to digitally approve multiple recurring payment charges at once, which allows merchants with recurring collections such as insurance premiums, investment SIPs, loan repayments, utility bills and more. Currently supported on transactions via internet banking and debit cards, UPI is soon to be added to this stack, which holds great promise for unlocking the recurring payments economy –existing business models scaling faster and a host of new innovative businesses coming up. Here’s a look at how businesses can leverage e mandates to drive growth and adoption. SaaS and B2B Businesses One of the major roadblocks SaaS and B2B businesses faced in India were recurring payments. Any SaaS business operating in India would have to collect upfront payments for their service or risk defaults or delayed payments collection. The other way to collect recurring payments was a manually deployed team of field agents who would do door-to-door collection or via ECS mandates, which required the business to approve recurring collection by submitting a form to the bank — not a viable option for software businesses. Since collecting recurring payments is of critical importance to SaaS businesses, many leading SaaS businesses are registered in countries which allow the collection of recurring payments. While this allows such businesses to easily access large markets like the US, it has restricted the growth of SaaS businesses in India and SaaS businesses working on India specific solutions, such as accounting. With the advent of e-mandates, here are a few problems that could be solved with recurring payments for SaaS businesses in India – Flexible Billing – Businesses with usage-based recurring payments billing need an effective model that will allow them to receive, modify and reconcile billing queries in an effective manner. Customers can choose to upgrade or migrate to a new plan or stop usage mid-plan, and it should be possible to accommodate these requests on the fly. Failure Management – Payments could fail at any given stage of the billing cycle and providing a way to automatically intimate customers about a failed transaction will help customer experience. Multi-currency support – If you anticipate customers from different parts of the world to sign up for your product, you should think of supporting various local currencies. Users are more comfortable paying with currencies they are familiar with, i.e, their local currency. Payment Options and integrations – Having the widest range of recurring payments options in addition to e-mandates — Credit Cards and Paypal — is a growth enabler. Also integrating the recurring payment solution with the accounting tool is important. Financial Services – Insurance Premiums, Wealth Investment & Loan Repayments For insurance companies, wealth management entities and lenders, one of the most problematic issues has to be renewal of insurance, collection of regular SIPs (Systematic Investment Plans) and collection of loan repayments respectively. Currently, financial services companies depend on ECS mandate to procure timely payments which need deployment of a customer support and field team to collect payments on time. Collection via ECS can thus be labour-intensive and costly and a hindrance to the growth of technology-led financial services products Going digital for recurring payments collections can dramatically reduce operating costs and allow scope for product innovation. Let’s see what challenges insurance and SIP agencies face and how one can solve them – Policies aren’t as flexible as a customer would want to have, for example, if they are looking to increase the term-plan they’d likely to have to pay another visit to a bank and the insurance agency to procure a new ECS mandate. With eNACH enabled mandates, a consumer could do it all over the internet without leaving his or her home. Insurance agencies and investment bankers have to develop an entire team for the collection of periodic payments and follow-ups with customers who might have paid. This is could be mitigated with eMandates where payments can be done automatically and electronically. Consumers failing to pay the premium and lapsing their policing because they aren’t able to adhere to the aforementioned methods to pay their premiums on time. Similarly for lenders can provide service in a much quicker and flexible manner to customers looking for additional loans and wealth investment companies can collect recurring payments from individuals looking to make changes to their investment portfolio.

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