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Consumer, Not A Card On File

A look at the implications of the RBI Guidelines on the Regulation of Payment Aggregators and Payment Gateways. What happens, if inadvertently policies influence consumers’ choice of technologies to be used?

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Over the last few years, India has seen tremendous growth in online transactions including ecommerce, OTT media, food delivery, and many more. Growth in these areas has in turn helped online payment to grow significantly in India. While multiple payment options are offered by these merchants to customers, cards are one of the preferred modes. Merchants and their payment-processors are trying to achieve convenient payment experiences by offering quicker checkouts and one-click payment to customers.  

Card On File

A card on file, or stored credentials, is the card information stored by a merchant, payment gateway, payment aggregator or digital wallet to process future transactions. It is an important feature, in terms of customer-convenience and makes the transaction process smooth. It eliminates the need of re-entering card details on the merchant site and helps in executing recurring payments. These players store the card number and other relevant details related to a card in an encrypted format; however, the card verification value (CVV) is not stored. At the time of a card transaction, customer consent is taken to store these card details for future reference.

In digital payments, the preferences of consumers are largely driven by the ease, speed & safety with which they can undertake and complete the transaction, using a specific payment instrument. Business models in this industry have evolved to facilitate this consumer-ask and make digital payments easy & handy for the consumers.

The RBI Guidelines dated March 17, 2020, on the Regulation of Payment Aggregators and Payment Gateways, prohibits payment aggregators and merchants from storing customer card credentials. The RBI has granted a “one-time” extension on implementation of this mandate, until 31st December 2021. 

The total prohibition on card data storage hinder the ease of transactions for consumers. Customer payment experience would take a hit, as customers would be required to enter the card details each time they make a purchase through the website. Recurring payments, in case of subscription-based services would be impacted, as the renewal cost would not be automatically deducted and the customer would be asked for the subscription / renewal fee for every cycle. 

Policy interjections that mandate the industry to change these consumer-convenience features will be expensive for all the stakeholders. They are costly for consumers who are accustomed to the current transaction-ease. Service providers might lose the consumers who might opt for other modes of payment. As a matter of regulatory- industry engagement, this also indicates the huge risk of influence of the regulators who could inadvertently shape the technological choices of the consumers. 

It is expected of the regulators to determine the safety aspects of any technology usage, and to protect consumer interests including privacy, data security, cyber-risks and other aspects; but using policy as a steering wheel to provide direction to technology choices could be detrimental in the long term, and probably even considered an over-reach. 

Digital India Idea

Lately, India has seen a boom in online transactions, which grew an estimated 80% in 2020. This is in line with the Government’s efforts to reduce the use of cash. The Indian consumers’ consumption style, needs & wants of digital payments products has changed since the past few years, and very rapidly since the Covid lockdown from last year.  

While the intent of RBI’s new guidelines is to strengthen customer safety and transaction security, the convenience of online payments could take a backseat. While it’s imaginative to expect the consumers to carry their cards around for this rule. In fact, it sets up the risk of offline theft.

Policy conversation in digital finance space should indeed keep “inclusion” as a theme, but avoid the narrative around “consumers being bechaara”. To continue the Digital India mission, we need to ensure that consumer digital choices are maintained according to their usage & convenience, and to build policies as a safety-moat for adequate protection of consumer rights.

Four Cs & Trust - As Glue 

The industry stakeholders sadly seem to view every consumer need vs service delivery, as a binary-decision-choice, be it :

  • Consumer protection Vs Misuse
  • Convenience Vs Confidentiality
  • Comfort (of access & speed) Vs Costs (of something going wrong)
  • Control of service Vs Crisis of confidence  

Consumer Protection could be improved by reimagining the current Ombudsman mechanism for speedier grievance redressal (within a set timeframe) and enforceability of the decisions. That would boost consumer confidence in the industry and its regulatory framework. 

While the businesses want to give choices to the consumers and to handhold them for industry’s growth and profits, the regulators rightfully want the industry to be accountable and to maintain high governance standards. Public policy discourse has to bring these together in the form of “let’s build consumer trust, with consumer-rights as moat”. 

We need an ecosystem of mutual-trust amongst stakeholders and one where they work together in developing pro-consumer regulations. After all, trust is binary - you have it or you don’t ! Just as the customer is more than just a card on file !

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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rbi guidelines consumer Card verification value OTT media

Srinath Sridharan

Independent markets commentator. Media columnist. Board member. Corporate & Startup Advisor / Mentor. CEO coach. Strategic counsel for 25 years, with leading corporates across diverse sectors including automobile, e-commerce, advertising, consumer and financial services. Works with leaders in enabling transformation of organisations which have complexities of rapid-scale-up, talent-culture conflict, generational-change of promoters / key leadership, M&A cultural issues, issues of business scale & size. Understands & ideates on intersection of BFSI, digital, ‘contextual-finance’, consumer, mobility, GEMZ (Gig Economy, Millennials, gen Z), ESG. Well-versed with contours of governance, board-level strategic expectations, regulations & nuances across BFSI & associated stakeholder value-chain, challenges of organisational redesign and related business, culture & communication imperatives.

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