Sony, Apple, Google, Zoom, PayPal and many others, including banks are warning customers and partners in India of a probable wave of declined transactions due to a new directive imposed by the world’s second largest internet market’s central bank. The new directive targets the manner in which recurring payments are processed in the country.

On the other hand, the Reserve Bank of India’s new directive calls for financial institutions as well as payment gateways to acquire separate approval around auto renewable transactions that weigh up to Rs.5,000 ($ 67) from consumers by conducting notifications, e-mandates and Additional Factors of Authentication (AFA). This directive is said to impact transactions over debit and credit cards.

As RBI puts it, the existence of this directive is to act as a ‘risk mitigant and customer facilitation measure’, specifically stating that issuers processing such transactions should send a pre-transaction notification to the respective customer at least a day ahead of the original charge by SMS or email as per the customer’s preference.

Although this directive was introduced in 2019, and is being implemented now, as banks and other financial institutions were not prepared to comply with it back then. This did not come off as news to India’s central bank, however, it did state that another delay in time will encourage the launch of a firm supervisory action.

A lot of companies have notified their customers including their business partners regarding the new directive.

Whereas tech giants such as Apple for one has announced to developers certain transactions that meet the criteria of the new directive will be declined by card issuers and banks.

Another tech giant such as Google, stopped accepting new recurring payment customers on its Play Store. It also told its developers to take down free trials and introductory pricing from the apps, until the ecosystem challenges are addressed.

Soon followed by Youtube, which began accepting prepaid, as in referring to the pay as you go for its premium service. Around this time, e-commerce giant Amazon was seen to be temporarily discontinuing new membership sign-ups for Amazon Prime free trial until further notice and is still believed to be waiting for a change in that notice.

Then came one of India’s largest private banks, HDFC announced that it would decline any Standing Instruction like e-mandate for processing recurring payments from merchant's website or app on HDFC Bank Credit card/Debit Card, if it does not fall under RBI’s compliant process.

Currently many financial institutions including HDFC, Axis and Kotak have already begun accepting the new rule.

However, certain companies such as Netflix for one has added support for autopay of UPI in India, since the new directive is said to not impact recurring payments made through UPI, as UPI are built by the coalition of retail banks.

Although this new directive is said to not include fintech startups in the game, RBI has its eye on the trends they generate to observe whether these trends might hurt the consumers.

“Until legislation catches up, regulation must adapt to ensure that digital innovation is absorbed in a non-disruptive manner”, says RBI Deputy Governor T Rabi Sankar.

“We will only be able to achieve a healthy and mature payments system if all stakeholders prioritize long-term improvements over short-term profits and internalize mature practices such as informed consent and data usage openness over time”, adds Mr.Sankar.