There used to be days when while applying for a loan, we had to go through a pile of paperwork and formalities just in order to allow the lender to deduct monthly EMIs from our bank account. This was not only making the loan approval process extremely tedious and time-consuming but some customers often had to pay fines for missing the EMI payment in case they did not opt for a bank mandate. However, with the introduction of the E mandate in the Indian payment systems, everything got revolutionized. In this article, we will discuss what E-mandate is and how it works.
E-mandate has solved a lot of problems for online businesses.
What is an E Mandate?
E-mandate is a digital payment service introduced by the Reserve Bank of India (RBI) along with the National Payments Corporation of India (NPCI). It works as an underlying platform for businesses in India to auto-debit and collect recurring payments from their customers’ bank accounts without any intervention from any party.
A mandate is a formal and standard instruction provided by a customer to the issuing bank allowing it to deduct a specific amount at a predetermined date and transfer the same to the merchant. So, an e mandate does the same but digitally without having the customers go through any paperwork. This works great and brings a number of benefits for both the merchant and its customers. We will discuss the benefits of an e mandate later in this article, before
that lets us learn how E-mandate works.
How Does E-Mandate Work?
E mandate helps a number of businesses that rely on collecting recurring payments for subscription based services from their customers. Insurance companies, OTT platforms, loan providers, etc have customers from whom they need to collect a fixed amount of money every cycle (weekly/monthly/yearly). They can do the same just by getting a simple one-time authorization from the customer and that’s all! All these works in a few simple steps:
The customer requests for an e mandate with the merchant.
- The merchant then sends an authorization request on its web portal, mobile app or through a link.
- The customer gives the authorization to the mandate by entering a few necessary details like Netbanking credentials or debit/credit card details.
- The details are then sent to the sponsor bank who then forwards the same to NPCI.
- NPCI verifies the same at its end and forwards it to the issuing bank.
- The authorization request is then accepted by the issuing bank and the status is updated with both NPCI and the sponsor bank.
- The final update is given to the payment service provider which notifies the merchant upon successful completion of the mandate authorization. The customer is also informed at the end.
- The payment service provider then activates the e mandate.
After completion, the recurring payment gets debited from the customer’s account on a predetermined date and deposited into the merchant’s account.
Benefits of e Mandate
E-mandate has a lot of perks and is extremely beneficial for any business dealing with recurring payments.
Saves Time and Labour
E mandate requires only one-time approval from the customers for the merchant if they wish to avail the benefits of the auto debit service. This saves the merchant from reminding its customers to pay on time in order to face no interruption in the service. It also eliminates a lot of mundane and unnecessary work that usually requires a fair bit of workforce.
Increase Customer Retention
Less friction and uncomplicated payment methods are always cherished by the customers. Moreover, a customer hates disruption in service just because he missed the payment deadline for some reason. E mandate solves this problem by providing a seamless auto-debit service for recurring payments. This allows the businesses to offer a hassle-free subscription service to their customers and increase the retention rate substantially.
A merchant can capture and track most transactions details online with the help of e mandate. Hence, there is no need to spend time and money on any reconciliation tool. It can be said that the mandate offers auto-reconciliation by default.
Easy to Activate
Activating E-mandate is extremely easy and just requires the customer’s approval. There is no paperwork, no signing of documents, no unnecessary formalities, and hence, no hassle at all. All can be done within a few minutes right at the convenience of fingertips. The customers can enroll themselves into e mandate using their smartphones.
E mandate works like magic and is a real boon for the businesses that require to collect recurring from their customers. Thanks to the easy setup and simple authorization process, merchants are readily accepting and integrating this payment service into their system. Having said this, it is also important to remember that one should choose a good payment service provider that can not only help in setting up such payment services but also provides uninterrupted support throughout.