eNACH Mandates: Unlocking The Recurring Payments Economy in India

eNach Subscriptions recurring payments

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 – 

  1. 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.
  2. 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. 
  3. 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.
  4. 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.

Consumer Media

Netflix has completely changed how modern customers consume media. Adoption of web-based streaming content started booming in India in 2016 when Netflix and Prime videos opened the door for the Indian customers. 

But, did you know?

Hotstar had a year’s headstart and still failed to capitalize.

Why?

Recurring payments is one critical factor.

Well here is the gist of current payment methods that create a poor experience for Indian customers compared to their western counterparts –

  • Absence of a recurring payment collection mechanism means companies have to collect payment for a longer-term upfront or follow-up periodically for renewal. In the former case, the higher ticket size leads to customer dropouts while the latter also risks customer churn. 
  • Indian consumer media brands still rely on credit cards or digital wallet payments for the subscription. The latter has to have available funds during renewal date otherwise the payment shows up as a failure.
  • ECS or NACH Mandates just wouldn’t work for consumer media brands as it illogical for customers to submit a paper form to allow a brand to deduct such small amounts every month.

Retail Subscriptions

Retail subscription is a new niche that’s taking flight in India. Over the last 2 years, brands like Amazon India have started offering people subscription services to their favourite perishable items like perfumes, groceries, skin care products and more. 

Brands like Kindle Unlimited, Loot Crate are offering fresh new books and collectables every month for a flat subscription fee. 

With eMandates getting a green light, these companies would only increase. Maybe we will see a brand like My Dollar Shave Club in India as well.

Currently, a lot of stores offer a modified subscription-based offering like –

Ustraa, a brand for men’s skincare and grooming, offers a set of three shipments, where the customer the first shipment as soon as he or she makes an order. They can later select when they would like to receive the 2nd and 3rd shipment as well. This is a simple example, where a brand has a great idea of a subscription a perishable grooming addon like razors but can’t collect recurring payments and therefore collecting payments up-front.

Utility Payments

Most of our utility bills are paid on a periodic basis, things like Phone bills, electricity bills and others. For example, your postpaid bills could be scheduled to be paid automatically using standing instructions with a credit card. 

But, the same thing can’t be done with other utilities. For example, electricity and water bills. It’s due to the dynamic bills that are generated on a usage basis every month. As soon as a new bill is generated, you are manually required to pay the amount in full before the due date otherwise risks penalization or no service.

But with Cashfree’s Payment mode, any bill payment provider can –

  • Collect dynamic-amount based recurring payments and set it up for its consumers in a few clicks
  • Give customers an option to get an alert before the amount is deducted, so that the customer remains informed.
  • If there are any penalties or overcharge, you can easily add that to your customer’s next billing cycle and charge them automatically. 

IoT Services

With recurring payments opening up for debit cards and internet banking via eNACH mandates, India can finally start seeing IoT industry capitalizing and building products that would mirror IoT innovation in the western hemisphere. 

In future, recurring IoT services like home-security monitoring, smart homes and more could be feasible without the need of creating your personal infrastructure. In fact, Google and Amazon are already making moves by introducing their products like the Nest Hub, or Amazon Echo, which are the first step in creating Indian smart homes. 

Expect monthly plans for home security, automatic replenishment of home essentials (Amazon Dash), and more to make forays in India with periodic plans.

Conclusion

Recurring Payments powered with eNACH and eMandates are unlocking a new economy in India. With Debit cards and internet banking being allowed for the first-time to make recurring payments in India. Various Industries in India could look forward to building a unique experience for their customers. Recurring billing offers a lot of pros for a business like predictable cash flow, predictable growth, better customer experience and affordable services. What are your thoughts, do you anticipate a growth in the Indian startup and internet ecosystem, let us know in the comments.

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