Author: root

Small businesses and start-ups running on a subscription model are losing out on users and timely payments due to the Reserve Bank of India’s new rule on recurring payments.

For instance, the non-profit digital rights advocacy group, Internet Freedom Foundation (IFF), which runs on a monthly donorship model, lost nearly 70 per cent of its existing membership base of close to 423.

Apar Gupta, Advocate and Executive Director, IFF, told BusinessLine: “It took us three years to build our member base. Most of our donors signed up using their debit and credit cards, which has been the primary mode of recurring online payments in India. After the RBI mandate came into being post-September 30, they weren’t able to sign up or make those payments.

“Essentially the bottleneck is on the banks’ end, which have not implemented the RBI guidelines and directives till now. This is making it impossible for existing members to sign up and make their recurring monthly payments afresh as the date for payment approaches. Donation authorisations have lapsed,” he explained.

An inverse problem

The Bengaluru-based expense management SaaS start-up, Fyle, is facing an inverse problem. “We are using at least 60-plus international services and products to run our business. All of these vendors were subscribed through our Kotak Corporate credit card. But this month we weren’t able to make payments to many of them because the bank claimed that the merchants we are trying to pay are not RBI recurring payment rules-compliant. The entire world runs on recurring payments for SaaS products, how will they know about the RBI’s specific rules? Now, we have been getting notices of possible account suspensions,” said Sivaramakrishnan Narayanan, Co-founder and CTO, Fyle.

New rules

Under the new rules, banks are required to inform customers in advance about recurring payments due, and transactions would be carried following a nod from the customer. So, the transaction will not be automatic, but will be done after authentication from the customer. Sijo Kuruvilla George, Executive Director, Alliance of Digital India Foundation (ADIF), said: “RBI’s new payment rule has resulted in major disruptions for businesses – an avoidable one that has put Indian start-ups at a disadvantage. For an entrepreneur, continuity in business is absolutely critical. The manner in which the policy was implemented has wreaked havoc and has put Indian companies in a precarious position.”

Mumbai-based digital publication and research start-up, FoneArena.com, was suddenly left to manually make payments using credit card at 50-plus internet-based services that it had been using for over a decade.

These services include various software, web servers and tools that the company has been using to run its business.

Varun Krishnan, Founder and Editor-in-Chief, FoneArena.com, told BusinessLine: “We are a small team of 10 employees. Going through renewing each website manually every month is difficult. I might need to hire another employee just to make these monthly payments. For certain services like AWS, I haven’t had to log in in over a year as the payments would directly get deducted from my credit card. Now, suddenly I got a mail from them saying my account would get suspended if I don’t renew. I had to go to the website and pay.”

Insurers have so far settled claims worth ₹20,859 crore related to Covid-19. According to the latest data available with the industry, the settlement ratio stood at 88 per cent as on October 13, for ₹20,859.4 crore. Of the total claims of 25,96,072, 22,84,429 have been settled by insurers.

Insurers, however, are now seeing a dip in demand for Covid-specific policies. “We find that the demand for health cover is now shifting towards non-communicable diseases (NCDs) and critical illnesses,” Sanjay Datta, Head – Underwriting & Claims, ICICI Lombard General Insurance Company, told BusinessLine.

Third wave

Till recently, there was good demand for standard Covid-specific insurance policies, Corona Kavach and Corona Rakshak, to be offered by all insurers as mandated by the insurance regulator. In the wake of concerns over possible third wave of the pandemic, the insurance regulator has extended the validity of the Covid-specific policies till March 31, 2022, from the previously notified deadline of September 2021.

However, the steady dip in new Covid cases and a notion that a third wave is unlikely are spurring people to think of buying cover for NCDs, critical illnesses and co-morbidities instead of Covid-related insurance.

“The demand levels for health insurance for non-Covid ailments has now reached pre-Covid levels and, in some cases, it has even exceeded previous levels,” said Datta. The pandemic and the turmoil it caused had actually increased awareness about the need for health cover as a main tool of social security, he added.

According to Sapna Desai, Head Marketing and Online sales, ManipalCigna Health Insurance, many people today are buying health insurance policies that provide value-based high sum insured to tackle the problem of medical inflation.

“The focus is on policies that give them no-compromise comprehensive cover at the best healthcare facilities, both in India and abroad, at a very affordable premium,” she added.

Going forward, the industry expects to see a fast-growing trend of innovatively designed feature-rich products, with lots of in-built benefits and optional packages that can be customised to secure not only the current healthcare needs but also the ones that may arise at different stages of one’s lifetime, she added.