23. e-NACH and e-Mandate
In earlier sections we covered NACH (offline) and Standing Instruction (SI) on cards. These solutions have positives and negatives.
Summary: ACH has better coverage (more bank account that cards), economical (works on flat fee) and has no restriction on merchant type or use case but SI on Cards is efficient solution (it is online)
What if we combine good points of these two solutions…
A solution that covers bank accounts (better coverage), online (efficient), flat fee (economical) and can be extended to all merchant use cases… ‘the bingo’ Solution… e-NACH
Basically, a paper based NACH is moved to online world where mandate form filling, mandate registration and debit is done online. That sounds good… right?
But e-NACH process involves an important step: Aadhar OTP validation (e-Sign) for mandate registration. In view of recent ruling of Supreme Court on Aadhar Card, NPCI decided to shut down the existing e-NACH flow.
So it doesn’t make much sense to get into details of a solution that is defunct but it is important to know did e-NACH solution delivered what it was envisioned to do?
Answer is ‘No’… e-NACH solution had many problems
- Multiple hops/redirections
- Mandate registration and debit were not done in real time
- Mobile No <> Aadhar <> Bank A/C <> Mobile No linking
- SBI didn’t participate (late as busy with consolidating other ‘State Banks’ under its umbrella or thought let’s wait for better flow)
So what will happen to the Bingo Solution for recurring payment use cases??
While NPCI is gearing up for e-NACH with net-banking flow, some aggregators launched ‘e-mandate’
What is ‘E-Mandate’?
Recurring payment solution based on net-banking flow and developed as bilateral arrangement between payment aggregator (s) and selected 4–5 banks.
Fundamentals:
To set a mandate on instrument (Card or account), one has to verify whether instrument details are correct and second, whether instrument ‘holder’ is correct.
In ACH (paper based): Account number is checked and signature is validated
In SI on Cards: Card number is validated and when customer does successful transaction, it proves that he/she is the cardholder
So similar process needs to be applied for e-mandate net-banking flow:
(a) Account Number: TPV (third party validation) on account number
In regular net-banking transaction the account number is not checked. But in TPV flow account number is validated against the account number that is passed as part of mandate form.
(b) Signature: When customer does successful transaction then it proves that account holder is also correct
Too wordy… so here is the illustration
Operations:
Registration: Once successful transaction is done then mandate is registered (status confirmation is given on T+1 day)
Debit: Mandate debit request to be triggered 2 days (T-2) before actual debit date and account will be debited on T day and confirmation will be shared on T+1 day (debit is still a batch processing)
Refunds: No APIs for refunds so merchant has to manage refunds offline
Commercials: Flat fee for registration (one time) and flat fee per debit
Positive aspects of e-mandate solution:
- At least it is ‘working’ unlike e-NACH
- Paperless / Online
- Flat fee model
- Coverage is not as high as paper based mandate but increasing (Refer to NPCI Link for latest banks, refer destination bank section)
Negatives:
- Not a ‘true’ real time solution (delayed status update and delayed debit)
e-mandate is great beginning and the solution will be cover all major banks where NPCI will act as clearing house. If the ‘somehow’ status updates are done in real-time then it can be great recurring payment solution for all use cases.
Anyway, that is how solutions are evolved… same as how BBPS platform is evolved from EBPP platform <next chapter>
