What is e-Mandate Service: e-Mandate Meaning
India’s recurring payment infrastructure, which can be termed as the underlying infrastructure for businesses to collect recurring payments in India, is finally here.
On June 8, 2022, RBI announced that the limit on card e-mandate is raised to Rs 15,000 from Rs 5,000 per transaction. This means that a customer will not need to enter a OTP on recurring payments up to Rs 15,000.
So, essentially, e-mandate means that a customer has given permission to a business to collect recurring payments from their bank account. And, close on the heels of UPI (Unified Payment Interface), e-Mandate/e-NACH is the latest step.
Recurring payments are intrinsic to many businesses – new and old. But, India has lacked a convenient way to process them due to restrictions on two-factor authentication (2FA).
What Are Recurring Payments?
Recurring payments or subscriptions are automatic payments. A customer authorises a service provider to debit a fixed or variable amount from their bank account at regular intervals using the NFC payment app.
Recurring payments can find use in various business models.
Over-the-top (OTT) Media Services: Online streaming services have revolutionised the way we watch videos and listen to music. Companies like Netflix, Amazon Prime, Spotify etc. are heavily dependent on subscriptions that need to be renewed at fixed intervals. Newsletters and magazines also require a monthly or annually recurring fee
SaaS: SaaS businesses are heavily dependent on charging a recurring payment every month which can scale up with use.
Financial Services: Loan repayments, investments, and insurance premiums are best paid in recurring intervals.
Utility: Telephone bills, electricity bills, cable bills, gym membership etc. come under utilities, which like we already know, are recurring in nature.
Retail & e-commerce: Subscription services like meal boxes or beauty boxes charge users for a
Electronic Clearing Service (ECS) Mandate
Prior to the emergence of e-Mandate, the Reserve Bank of India (RBI) introduced ECS or Electronic Clearing Service. This process involves submitting a physical form i.e. a mandate to your bank or a company.
But, this solution isn’t a very efficient one.
What is e mandate, you can create an electronic mandate in just a few minutes and save time by not having to submit physical forms. Moreover, it gives you complete control over your data as you are able to store it safely in your own account rather than with third parties like banks or companies who may not have the same level of security as you do.
NPCI introduced e-Mandate services to reduce processing time, make recurring payments more streamlined and efficient.
With e-Mandate / NACH mandate, one can easily authorize recurring payments by using their Netbanking or Debit card credentials.
This will help in reducing the time taken to process recurring payments. It also helps in reducing the banks’ costs on processing these mandates.
e-Mandate Advantage Over ECS mandate
The e mandate is a single mandate for all your SIPs. It is a one-time mandate that can be used for multiple SIPs. The e mandate is valid for 90 days from the date of issue.
The e mandate can be downloaded from the MF website, or can be generated through e-portal. Once you have created an e-mandate, you don’t need to submit it again when making additional investments in any scheme within the same fund house.
The only thing that needs to be done is to update the details whenever there are changes like change in bank account number or address etc. This can be done through the ‘Update Details’ option available on the ‘My Profile’ tab under My Account section of the MF website.