New Delhi, Mar 30 (PTI) An extension in the deadline for implementing the Payment Aggregators and Payment Gateways (PAPG) guidelines till June will provide a breather to the industry and enable smooth implementation, according to industry experts.

The Reserve Bank of India has made Additional Factor of Authentication (AFA) mandatory after March 31, a move that will impact automatic recurring payment for various services including payments of utility bills and subscription-based services.

"My fear is that the progress we have made so far will be eradicated. Going from the digital economy to the cash economy and then coming back to the digital economy will be extremely tedious," Aruna Sharma, former RBI Digitisation Committee Member, said at an event organised by The Dialogue.

The Dialogue, a research and public-policy think-tank, conducted the webinar on the Payment Aggregators and Payment Gateways (PAPG) guidelines on Tuesday.

Under the new norms, banks will be required to inform customers in advance about recurring payment due and transaction would be carried following nod from the customer.

So the transaction would not be automatic but would be done after authentication from the customer. For recurring payments above Rs 5,000, banks are required to send one-time password to customer as per the new guidelines.

The guidelines define payment aggregators as entities that facilitate e-commerce sites and merchants to accept various payment instruments from customers for completion of their payment obligations without the need for merchants to create a separate payment integration system of their own.

Existing non-bank entities offering PA services will have to apply for authorisation on or before June 30, 2021. They shall be allowed to continue their operations till they receive communication from RBI regarding the fate of their application.

The RBI had announced these steps to bolster safety and security of card transactions.

Recently, the RBI had enhanced the limit for contactless card transactions and e-mandates for recurring transactions through cards (and UPI) from Rs 2,000 to Rs 5,000 from January 1, 2021 with a view to further the adoption of digital payments in a safe and secure manner.

Sharma said while the RBI's regulations are not being questioned nor are its intentions to protect customer data, it is important that concerns of players be addressed.

She noted that industry data shows that transactions are sometimes abandoned when the consumer faces friction during payments. The greater the friction introduced, the steeper the decline in willingness to transact online and the higher the likelihood of digital exclusion.

"A consultative approach should be adopted to provide immediate extension till June to banks to comply by the guidelines. The process should be inclusive of dialogue and suggestions to result in smooth and involved transaction,” she added.

The panelists were of the view that industry understands that security and customer convenience of payments is the cornerstone of the digital economy and is critical to enhancing customer confidence in online payments.

While the economy recovers from the aftermath of the COVID-19 pandemic, the guidelines have created additional burden on industry players, other relevant stakeholders, and consumers, they added.

The primary challenges of compliance, requirement of digital infrastructure by several stakeholders to revamp such integration is massive and extends to technology system changes, data-interchange process changes, changes to underlying business contracts, intimation to customers, and a need for significant time and resources might hinder the remarkable progress being made in the financial ecosystem of the country, opined the panelists.

Avimukt Dar, co-founder of IndusLaw, said RBI's stance to not extend the e-mandate timeline is likely to derail the vision of Digital Bharat and significantly disrupt the services to consumers.

He added that this will impact the industry and cashless transactions, which has seen a huge push by the current government and is largely enabled by the digital payments industry.

"With the added complexities driven by the present pandemic, which has increased the dependency of customers on e-commerce and digital payments, the impact of this move is likely to be unprecedented. As we move towards compliance with the e-mandate circulars, the significant scale of infrastructure development required to be built by various stakeholders cannot be undermined," he said, adding that ultimately, this will impact the continued growth of the digital economy and dissuade cashless transactions.

The RBI should work with the industry and adopt a more consultative approach and extend the e-mandate timeline as the industry needs a few more months to upgrade their systems to comply with the e-mandate framework, digital payments expert Ram Rastogi said.

Industry body Payments Council of India (PCI) has also requested the RBI to give at least a one month extension on the guidelines.

"Everybody has understood the seriousness of it because it's Rs 2,000 crore a month business, as per PCI estimates. We hope that the cycle is not broken and the end consumers and merchants are not inconvenienced. This one month extended time will surely help all of us to facilitate a smoother transition to the newer way of recurring payments as envisaged by RBI," Vishwas Patel, Executive Director, Infibeam Avenues Limited and Chairman of PCI told PTI.

A senior executive at an e-commerce company said the industry is not prepared to implement the e-mandate framework issued by RBI.

Starting April 1, customer e-mandate transactions will be declined by banks, if further extension is not granted by RBI, the official said, adding, this will cause major disruption to recurring transactions and will erode customer trust in digital payments.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)