What is E-mandate and how does it work?

Convenience is crucial in the dynamic landscape of modern commerce in India. People seek ways to streamline their lives, and technology is at the forefront of this transformation. A prime example of this is the e-mandate, which has transformed the process of handling recurring payments in India.

Solving the issue of missed payments, an e-mandate ensures your bills are paid on time, every time, without the hassle of manual transactions. This automated solution is not only time-saving but also reduces the risk of late fees and service disruptions. As more people embrace digital financial tools, the e-mandate is becoming an essential part of managing finances efficiently.

It offers a glimpse into a future where our financial responsibilities are seamlessly integrated into our digital lives, providing peace of mind and convenience. This blog will delve into how the e-mandate is reshaping the financial landscape, offering a convenient, secure and reliable solution for recurring payments.

What is an e-mandate?

The e-mandate is a digital payment service introduced by the Reserve Bank of India and the National Payments Corporation of India (NPCI). It provides a framework for businesses to collect recurring payments automatically.

A mandate is an instruction given to your bank to allow automatic debits from your account. This system simplifies the management of recurring payments like insurance premiums, SIPs, and loan installments, removing the need for paperwork and manual processing.

Unlike the older system requiring signed physical forms, e-mandate is quick and efficient, leveraging API-based eNACH technology introduced by NPCI in 2018. This innovation ensures hassle-free, timely payments without the risk of penalties.

How does e-mandate work?

Understanding the steps involved in setting up an e-mandate can help you appreciate its efficiency and convenience. Here's a breakdown of each step, from initial consent to the final recurring payment instruction, to give you a clear picture of how this system works:

Step 1: Consent

The first step in setting up an e-mandate involves the customer permitting automatic deductions from their bank account. This consent can be provided through various methods, such as filling out forms, visiting websites, or using mobile apps. During this process, the customer selects the payment amount, frequency, and duration, ensuring they have control over the specifics of the recurring payments.

Step 2: Authentication

Once the customer has given their consent, the next step is to verify and authenticate the e-mandate. This is done using net banking credentials or debit card details. Authentication ensures that the customer is indeed the owner of the bank account and agrees to the terms and conditions of the e-mandate. This step adds a layer of security, making sure the process is both safe and reliable.

Step 3: Validation

In the validation step, the National Payments Corporation of India (NPCI) plays a crucial role as an intermediary. NPCI is a non-profit organization that facilitates digital payments and settlements across India.

It verifies the details provided by the payer and the request made by the payee. This validation step ensures that all information is accurate and that the e-mandate can be processed smoothly.

Step 4: Recurring payment instruction

After validation, the customer's bank sets up the recurring payment instructions. This setup allows the bank to automatically deduct payments on the specified due dates. The customer will receive a confirmation message and can check the status of their e-mandate through their bank's portal or app.

This transparency helps customers stay informed about their payment schedules and account activities. Customers have the flexibility to cancel the e-mandate at any time by contacting their bank or the payee. In the event of any disputes or issues, NPCI mediates to resolve them, ensuring compliance with regulatory guidelines and maintaining trust in the system.

Types of e-mandates

e-mandates come in various forms, depending on the payment method selected. Here are two prevalent types:

• Debit card e-mandate

With a debit card e-mandate, you can link your debit card to a merchant or service provider and authorize them to deduct a fixed or variable amount from your bank account at regular intervals. The transaction limit for a single debit card e-mandate is ₹15,000. If the transaction amount exceeds ₹15,000 or the cardholder's limit, an additional factor of authentication (AFA), such as an OTP, is required. The maximum limit for a single transaction via debit card e-mandate in India is ₹1 lakh.

• Credit card e-mandate

A credit card e-mandate allows you to connect your credit card to a merchant or service provider and authorize them to charge a fixed or variable amount to your card at specified intervals. As of March 2024, the limit for e-mandates on credit card bill payments is ₹1 lakh per transaction without the need for additional factor authentication.
This limit also applies to other categories like mutual fund subscriptions and insurance premium payments. By using an e-mandate, both debit and credit cardholders can streamline their recurring payments, making transactions seamless and efficient. These types of e-mandates eliminate the need for manual intervention, ensuring timely and hassle-free payments.

Why is e-mandate beneficial?

Ever since it was introduced, e-mandate has been growing progressively and offers real-time authorisation confirmation. These improvements have made it easier for many industries to adopt the recurring payment model. Here are some major benefits of e-mandates:

1. Enhancing customer retention

One-time digital authentication enables automatic debiting from your customer's bank account, ensuring they enjoy uninterrupted services. This not only boosts customer loyalty but also enhances retention over time by eliminating the need for constant payment reminders.

2. Smoother payment process

e-mandate simplifies recurring payments by allowing businesses to auto-debit customer accounts. This reduces the friction of customers having to log in to make payments, ensuring continuous cash flow for the business.

3. Lower administrative costs

With auto-debit functionality, businesses no longer need to chase customers for payments. This significantly cuts down on operational efforts, invoicing tasks, and overall administrative costs.

4. Efficient auto-reconciliation

Since most transaction details are tracked and captured online, the time, effort, and money spent on acquiring and maintaining multiple tools are greatly reduced. This makes the reconciliation process more efficient.

5. Simplified enrolment

The process is straightforward, requiring only an active bank account and card details for a one-time enrollment. This provides customers with a lifetime of hassle-free service.

6. Flexible payment plans
   e-mandate gives businesses the flexibility to manage customer debits. This allows for changes in the payment cycle or even skipping a cycle if needed, enhancing the overall user experience.

India's changing payment landscape?

The digital world is reshaping how we handle everyday tasks, and payment systems are no exception. The advent of e-mandate has brought a new level of convenience, transforming how we manage recurring payments. Its streamlined process eliminates the hassle of manual interventions and ensures smooth, uninterrupted transactions.

This shift not only simplifies life for consumers but also for businesses with a reliable and efficient payment solution. As technology continues to advance, tools like e-mandate are paving the way for a future where managing finances is easier, efficient and user-friendly.