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What is e-Mandate

The e-Mandate is powered byReserve Bank of Indiarespond in singingNational Payments Corporation of India (NPCI) initiated adigital paymentA service that allows individuals and businesses to authorise the automatic deduction of regular payments from their bank accounts.

An electronic authorisation (e-Mandate) is a standing instruction to the user's card-issuing bank and other institutions that allows them to automatically debit the user's bank account with the stated amount.

E-Authorisation is a convenient way for businesses and their customers to easily manage all their recurring payments (e.g. insurance premiums, SIPs, loan instalments, etc.). E-Authorisation eliminates the need for paperwork, manual intervention, reminder hassles and late penalties.

There is no limit to the number of electronic authorisations that can be set up through a bank account.

even thoughIndiaRegular payments have been around for a long time, but they were mainly authorised through paper forms that customers had to complete, sign and submit. This is an operationally costly and manual process that takes days to complete. The API-based e-NACH (often referred to as e-Mandate) is powered by the NPCI Launched around 2018.

Meaning of periodic payments

To understand what e-Mandate means, you must first understand recurring payments.

A recurring payment or subscription is an automatic payment where the customer authorises the service provider to deduct a fixed or variable amount from their bank account at regular intervals.

Today, recurring payments can be used in a variety of business models, for example:

Digital Lending Industry : NBFC and digital lenders can automatically recover loans by creating e-authorisations for amounts up to Rs. 50 lakhs. This reduces loan defaults and ensures that borrowers pay EMIs on time. Investment and Wealth Management: Investment platforms can provide a seamless customer experience to investors by automating SIP payments and ensuring uninterrupted investments by customers. Insurance Providers: Insurance premiums are typically charged on a regular monthly, quarterly, half-yearly or annual basis. Users can access the relevantSoftware WalletmaybePayment GatewaySubscribe to create eAuthorisations to automate payments. Software-as-a-Service (SaaS): SaaS businesses rely heavily on recurring monthly payments that can be easily scaled. Utilities: Telephone bills, electricity bills, cable TV bills, gym memberships, etc. are utilities and are recurring payments. Rentals: Housing rentals, office rentals, shared work and shared living spaces, and other rental facilities are usually on a periodic payment model.

Recommended Reading:What is a payment gateway

How e-Mandate works

The eAuthorisation enrolment process is where the customer enrols for regular payments through eAuthorisation or eNACH. Whether the customer is buying an insurance policy or investing in a SIP, they can choose from the outset to pay their premiums or instalments via eAuthorisation.

In short, it is a process that allows a business to register a service/product for a client who is required to pay for it in a timely manner.

For example, users can plan their system investments through electronic authorisation, which is a completely digital process. In addition, confirmation of authorisation does not take more than a few days. The authorisation process is described below:

Consent: The client allows the payee/receiver to initiate an automatic debit, which can be done in a variety of ways, such as by filling out a form, a website or a mobile application. The payer can choose the amount, frequency and duration of the payment. Authentication: The customer verifies and authenticates the electronic authorisation using one of the available options (e.g. online banking credentials or debit card details). This ensures that the payer is the owner of the bank account and agrees to the terms and conditions of the electronic authorisation. Validation: The National Payments Corporation of India (NPCI) acts as an intermediary in the e-Authorisation process and validates the payer's details and the payee's request. NPCI is a not-for-profit organisation that facilitates digital payments and settlements in India. Recurring Payment Instructions: The customer's bank sets up a recurring payment instruction that enables the payee to automatically deduct the payment on the due date. The payer receives a confirmation message and can check the status of the e-Authorisation on their bank portal or app.

The payer can cancel the e-Authority at any time by contacting his/her bank or the payee. In case of any disputes or issues arising out of such transactions, NPCI will mediate and ensure compliance with regulatory guidelines.

Recommended Reading:National Payments Corporation of India NPCI

Types of e-Mandate

There are different types of electronic authorisation depending on the payment method chosen by the user. Below are two common types of electronic authorisation:

Debit card electronic authorisation

Debit card eAuthorisation allows you to link your debit card to a merchant or service provider and authorise them to debit your bank account for a fixed or variable amount at a specified frequency.

There is a limit of Rs. 15,000 for a single transaction through Debit Card e-Authorisation. This limit is applicable to all online subscription categories. For transactions above Rs. 15,000 or above the cardholder limit, AFA (OTP authentication process) is required. In India, the maximum single transaction limit through Debit Card e-Authorisation is Rs. 10 lakhs.

Credit Card Electronic Authorisation

Credit card eAuthorisation allows you to link your credit card to a merchant or service provider and authorise them to charge a fixed or variable amount to your credit card at a specified frequency.

With effect from March 2024, the limit for e-authorisation of credit card bill payments is Rs 100,000 per transaction without additional authentication (AFA). This limit is applicable to other categories such as mutual fund subscriptions and insurance premium payments.

Benefits of e-Mandate

Merchant Benefits:

Customer retention: With a single digital identity verification, e-Mandate/eNACH allows users to have their customer accounts automatically debited at the beginning of each billing cycle. This process therefore relieves customers of the burden of regular verification of periodic payments and allows them to enjoy the products and services offered by the merchant. Reduced administrative costs: Costs associated with invoicing as well as following up with customers and recovering overdue payments are significantly reduced. Security: With e-Mandate, payment solution providers strictly manage PCI compliance and customer data is more secure and reliable.

Customer Benefits:

Uninterrupted service. Verify your subscription once and enjoy uninterrupted service at all times without constant payment reminders. Subscriptions allow customers to purchase a plan that suits their needs. Authentication is a simple process and customers only need to provide their online banking credentials.

concluding remarks

e-Mandate is a major advancement in the digital payments space in India. Many verticals have been able to adopt this business model and have seen significant improvements in metrics such as customer retention, cash flow management and a steady decline in delinquency rates.

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