Banks and payment aggregators are rushing to meet the October 1 deadline for implementing a new system for standing instructions for recurring online transactions as the Reserve Bank of India is not likely to extend it. Banks are sending communications to customers saying that they will not process recurring payments, and customers will have to make payments directly to merchants.
“In compliance with the regulatory requirements, we are currently building a solution to seamlessly manage all your domestic standing instructions for recurring payments. This solution will be available soon for you. Starting October 1, any existing standing instruction for domestic and international recurring transactions on your card account will not be processed. We request you to make these payments directly to the service providers to avoid any interruptions,” American Express said in a recent message to customers.
How does the new system work?
Under the proposed system, as a risk mitigating and customer facilitation measure, the card-issuing bank will have to send a pre-transaction notification to the cardholder, at least 24 hours before the actual charge or debit to the card. While registering e-mandate on the card, the cardholder shall be given the facility to choose a mode among available options (SMS, email, etc.) for receiving the pre-transaction notification from the issuer. On receipt of the pre-transaction notification, the cardholder shall have the facility to opt-out of the particular transaction or the e-mandate. For transactions above Rs 5000, banks will also be required to send one time passwords to customers.
What is a standing instruction?
A standing instruction is a service offered to customers of a bank, wherein regular transactions that the customer wants to make are processed as a matter of course instead of initiating specific transactions each time.
This service relates to transactions like renewing subscription to over-the-top (OTT) platforms, newspapers and magazines, and utility bill payments.
The issue
Large lenders and payment entities including State Bank of India, Citi, HDFC, Axis, HSBC, Visa and Mastercard had asked the RBI to postpone the deadline for putting in place a new system to alert customers on ‘standing instruction’ transactions.
The banks were asked to set up the system by March 31, 2021.
The lenders also wanted RBI to exclude transactions against pre-existing standing instructions and those with international merchants from the new conditions for e-mandates on cards for recurring transactions.
Not just server down, but ‘technical glitches’ seems to have become a common term for banks.
The number of glitches in the online banking space seems to be rising, with recent cases surprising everyone – large sums being transferred to wrong bank accounts.
So far, two cases from Bihar have actually uncovered the system issues in the banking system.
A glitch that credited funds
A private tutor in Khagaria was erroneously credited Rs 5.5 lakh in his bank account by the South Bihar Gramin Bank, and two school students in Katihar were credited Rs 960 crore overnight by the North Bihar Gramin Bank.
The tutor has been arrested for not returning the money, according to The Hindu, while the incident that happened with the two school students is under investigation.
For the Katihar case, the bank’s branch manager said that there was some glitch in the computerised system of sending money. The amount was visible in their statements but the actual money wasn’t in their account. For the Khagaria case, however, the money was credited and the tutor claimed that he did not return the money because it was government relief sent to him.
The two incidents have caused havoc, making villagers run to ATMs to check if they too had been struck with such luck, according to NDTV. But, so far, only two such incidents have been reported.
This is, however, not the first time such a ‘glitch’ has happened.
In February, one of the world’s largest banks – Citibank – accidentally transferred $900 million to cosmetic company Revlon’s lenders. Citi was serving as the administrative agent or loan agent between Revlon, the embattled cosmetics company, and its creditors.
The bank accidentally paid those lenders much more than it had to. The bank had to credit only $8 million, but ended up transferring $900 million, according to reports.
The US District Court judge termed this to be the “biggest blunder in banking history”, after the bank had moved the court, because it still had not received $500 million from the accidental transfer.
Apart from erroneous transfers, there have been other incidents of continuous technical glitches to an extent that the Reserve Bank of India banned a top private bank from issuing new credit cards – the bank’s best seller.
HDFC Bank was the bank that was banned for eight months from issuing new credit cards.
The RBI had taken this step after customers faced multiple glitches in the bank’s internet and mobile banking systems for over two years.
On Friday, Punjab National Bank‘s Twitter account was seen flooded with complaints from several customers. They raised concerns over the technical glitches they have been facing throughout this week.
Below are two of the many instances from PNB’s Twitter account –
Dear customer, we regret the inconvenience caused to you. Our App service is facing glitches due to some technical difficulty. However, our team is working on the same and it will be resolved soon.
Dear customer, we regret the inconvenience caused to you. Our Internet Banking UPI, and APP services are facing glitches due to some technical difficulty. However, our team is working on the same and it will be resolved soon.
“Dear customer, we regret the inconvenience caused to you. Our App service is facing glitches due to some technical difficulty. However, our team is working on the same and it will be resolved soon.” – has been the bank’s standard reply to all such complaints.
Glitches in the PNBONE mobile application have been rising. This could be because of the newly built app “PNBONE” after the mega merger of Oriental Bank of Commerce, United Bank of India with Punjab National Bank, sources, who did not wish to be named, said, adding that the tech team is looking to help resolve all the issues for a better banking experience.
At times, customers face technical glitches when banks go for maintenance activities. Failed transactions and reconciliation takes its own time and customers have no choice than waiting and hoping for the seamless service.
India last week launched the account aggregator (AA) system to consolidate financial data of users in one place. The system will extend credit services to them based on that information, and will be based on Unified Payments Interface (UPI) payment theme.
As of now, eight of India’s major banks – State Bank of India, ICICI Bank, Axis Bank, IDFC First Bank, Kotak Mahindra Bank, HDFC Bank, IndusInd Bank, and Federal Bank have joined the account aggregator network.
And, of these, four – HDFC Bank, ICICI Bank, Axis Bank and IndusInd Bank – have gone live. FinTechs are also seeking to join the network, with Fi being among the first.
The AA system will help reduce the need for customers to wait in long queues, use internet banking portals or share passwords.
Here is a recap of ETBFSI’s report of last year in October, which noted that AA systems have become extremely popular over the recent years with the rise of services like Mint and Personal Capital. What is an account aggregator? Account aggregation or financial data aggregation is a process whereby data from several or all of an individual’s or household’s financial accounts are collected in one place. In terms of online banking, the user may be provided with a service that curates a home page on which account holders can see information from all of their checking, savings, CDs, and brokerage accounts. Personal finance software, apps, and online services like Quicken or Mint provide such account aggregation services, and are thus, called account aggregators. How does an account aggregation work? Account aggregation usually occurs only within a single financial institution but certain assets held by the user outside a financial institution may be included if the account holder has agreed to it. Personal finance services offer customers the option to ‘aggregate’ data from all of their savings, checking, brokerage accounts, as well as other financial assets across all institutions that the users have their accounts with. These services usually require them to provide their account credentials (username and password) if they wish to avail the facility. Using the given information, the downloads data from each account to include in the aggregation. Often, account aggregation software is allowed only to access balance information and transaction records. Furthermore, for security reasons, many aggregation services do not permit users to make transactions from within the aggregate portal. In addition to the mentioned services, some softwares, often used by professional financial advisers on behalf of their clients, bring together additional net-worth data, such as recent home-value estimates, categorize cash inflows and outflows, and debt liabilities in the financial picture. Benefits of account aggregation
Overview: The main use is getting a general overview of the company or individual’s financial situation.It’s the “tidy desk” that keeps you updated and in control.
Planning: Account aggregation can be used as a financial management and planning tool by providing streamlined account access for account holders, especially for families who have multiple financial goals.
Usage patterns: It helps keep a track of our own patterns. If used to track a customers’ patterns, it detects non-payments, quickly and offers personalised offers that grab their attention and generate customer loyalty.
Real-time: It is constantly updated, offering new on-demand updates, which is humanly impossible to do at the quick speed that aggregator does.
Process automation: It’s easy to forget to input data (a new transfer), to make a mistake when making an account balance, etc. Process automation offered by this kind of APIs minimises errors and oversights that anyone could make, simplifying financial control.
Problems faced by the users
Mechanical Difficulties: Since many institutions are not aggregator-friendly, it is forced to robotically “scrape” the information. This involves a computer program visiting a bank’s website, logging in using a client’s credentials and then reading through code to take out information like account balances automatically. The scraping process is quickly overwhelming the servers of popular banks, creating a website slowdown.
Prone to hacking: Banks have struggled with identifying the difference between account aggregators logging into an account several times and often confuse it with hackers to give the latter an easy pass. This may even hurt client relationships as consumers may face account lockouts if there have been too many failed attempts to log in.
Tussle between banks and aggregators: Some large banks have completely banned account aggregators from accessing their website by blocking the IP address of an account aggregator’s computer program. Consumers are caught in the middle of this tussle as they may see inaccurate data or may not be able to access their financial data at all.
The need of the hour is to develop an application programming interface (API) designed to handle data requests by the account aggregators. By routing account aggregation requests to an API rather than a website, slowdowns and the risk of exposing login credentials can be prevented. Account aggregators in India Indian banks are also gearing up to launch account aggregators. Axis Bank, Bajaj Finserv, ICICI Bank, IDFC FIRST Bank, HDFC Bank, Indusind Bank, Kotak Mahindra Bank and State Bank of India have been working to adopt the account aggregator (AA) framework. The first account aggregator to receive their license in India is Onemoney. Not far behind, Cams Finserv, FinSec AA Solutions and Cookiejar Technologies have received operating licences. An account aggregator ecosystem, as envisaged by the RBI for India, would be a platform for financial services companies to reach out to the consumer and seek consent for using their personal data to optimise their product offerings.
PhonePe Account Aggregator Pvt Ltd, a fully owned subsidiary of the PhonePe Group, has got in-principle approval from RBI to operate as an account aggregator (AA).
The licence permits PhonePe to launch its account aggregator platform that will enable free and instant exchange of financial data between the financial information users (FIUs) and financial information providers (FIPs) with due consent from customers, in a safe and secure manner. This will help Indian consumers avail financial services in a more convenient manner.
Commenting on the development, Rahul Chari, CTO and Co-founder of PhonePe, said, “The account aggregator licence will allow us to play a pivotal role in shaping the emergent account aggregator ecosystem for consent-based financial data sharing. Our AA technology stack will enable any FIU to instantly retrieve financial information with customer consent from the FIP. We are looking forward to working closely with all the industry stakeholders to take forward RBI’s vision of driving deeper financial inclusion across the country.’’
PhonePe is a digital payments platform with over 300 million registered users. Using PhonePe, users can send and receive money, recharge mobile, DTH, data cards, pay at stores, make utility payments, buy gold and make investments. PhonePe forayed into financial services in 2017 with the launch of gold providing users with a safe and convenient option to buy 24-karat gold securely on its platform.
PhonePe has since launched several mutual funds and insurance products such as tax-saving funds, liquid funds, international travel insurance and Corona Care, a dedicated insurance product for the Covid-19 pandemic among others.
Switch platform
PhonePe also launched its Switch platform in 2018, and today its customers can place orders on over 600 apps including Ola, Swiggy, Myntra, IRCTC, Goibibo, RedBus etc. directly from within the PhonePe mobile app. PhonePe is accepted at 20+ million of merchant outlets across India.
The Reserve Bank of India has extended the scope of permitted devices for undertaking tokenised card transactions to include consumer devices such as laptops, desktops, wearables (wrist watches, bands, etc.), and Internet of Things (IoT) devices.
This is in view of uptake in the volume of such transactions during the recent months.
The RBI, in a circular to authorised card networks, said this initiative is expected to make card transactions more safe, secure, and convenient for the users.
Hitherto, the tokenised card transaction facility was available only for mobile phones and tablets of interested cardholders.
Tokenisation means the replacement of actual card details with a unique alternate code called the “token”, which will be unique for a combination of card, token requestor and device.
Authorised networks
In January 2019, the central bank had permitted authorised card payment networks to offer card tokenisation services to any token requestor (that is third-party app provider), subject to the conditions.
There are five authorised card payment networks — American Express Banking Corp, Diners Club International Ltd, MasterCard Asia/ Pacific Pte Ltd, National Payments Corporation of India and Visa Worldwide Pte Ltd — operating in India.
In the January 2019 circular, the RBI said its permission to card networks for tokenisation in card transactions extends to all use cases/channels [for example: near field communication/ magnetic secure transmission-based contactless transactions, in-app payments, QR code-based payments, etc.] or token storage mechanisms (cloud, secure element, trusted execution environment, etc.).
All extant instructions of RBI on safety and security of card transactions, including the mandate for Additional Factor of Authentication (AFA)/PIN entry, are applicable for tokenised card transactions also.
To access to the new version of YONO and YONO Lite with enhanced security features, as per the press release, users will have to update their mobile app and complete the one-time registration process on these apps. The registration process verifies the SIM of the registered mobile number (RMN) with the bank in order to complete the registration.
Britain’s Lloyds Banking Groups has announced its plans to further close 44 more branches in addition to its earlier announcements.
Earlier, the group moved to close 56 branches. A total of 100 branches will close over the next 12 months.
Under this phased closure program, 29 Lloyds Bank branches and 15 Halifax branches are to be closed in England and Wales.
The group has cited the consumer shift to online banking during the pandemic for this closure.
Vim Maru, retail director for Lloyds Banking Group, said, “ We’ve also seen our digital banking customers grow by over four million in five years, to almost 18 million, of which 13.6 million also choose to be active app users.”
“Like many businesses on the high street, we must change for a future where branches will be used in a different way and visited less often.” He added.
The Unite union has denounced the move saying the bank was “ Walking away from local communities.”
Unite national officer Caren Evans said, “ The decision to further erode its presence within our communities is baffling.”
More businesses have started using online banking, and the dependence on brick-and-mortar branches has diminished considerably.
Prashant Ganti
Over the years, technology has reshaped business functions and accounting is no different. The impact of rapid advances in automation technology, Artificial Intelligence (AI), integrated platforms, cloud-based software, and an explosion of data are felt in the finance world.
Here are a few trends to watch out:
1. Acceleration of cloud-based accounting
Cloud-based accounting solutions have played a major role in the successful transition to pandemic-induced remote working. We have seen several years of digital transformation in just a few months. Beyond enabling anywhere and anytime access, cloud accounting allows:
Systematization of remote collaboration, breaking the communication impasse between internal and external entities like accountants, CFOs and business owners.
Augmented productivity levels due to elimination of data entry and automation of day-to-day tasks.
Ability to glean cross-functional, real-time insights from multiple business sources and provide leading indicators into how a business is going to perform rather than having to pour over past historical information.
2. Technology-driven tax and reporting compliance
We will increasingly see adoption of GDPR model of compliance by design. The passage of GST and e-invoicing in India, VAT in the Middle East, and growing movement towards electronic invoicing in Europe and LATAM is a testimony to the fact that authorities across the globe are implementing technology-driven compliance with a threefold aim: reduce tax evasion, increase compliance, and retain flexibility to implement policy changes.
This means that internal business systems need to be future-oriented and not just address today’s compliance needs. This also has implications for other aspects of business and economy in general. For instance, the electronic authentication of invoices and tax returns done by revenue authorities can allow lenders to judge the potential of the borrower, which in turn could lead to a boom in lending easily.
3. Continuous accounting
In the past decade, we have seen two major technological changes—cloud and mobile. The cloud has ensured that the access to data is continuous, and mobile has allowed continuous transactions with the help of applications. Together, mobile and cloud have ensured that computing is continuous. Despite this advancement, accounting in many companies still works on a batch mode. Companies and accountants still set aside several days for period-close activities. However, today’s technology can help design financial processes that inheres within typical batch processing activities like financial close and continuous accounting, which ultimately results in operational efficiency.
4. AI will be well-entrenched in accounting
Today’s finance function is either uninitiated into AI or only uses limited AI. This is about to change. A pwc study says that a substantial number of financial decision-makers are investing in AI. AI has started playing a bigger role in accounts payable automation and spend management, primarily in the extraction of information from receipts and invoices, detecting fraud and duplicates, and automatic routing of invoices to the next stage of processing. This eliminates much of the data entry.
We can also see AI being increasingly used in AR functions like predicting the likelihood of a customer payment, and cash flow. Furthermore, AI will play a major role in the reconciliation process. All this will transfer a bulk of low-level tasks from the hands of accountants and other financial professionals to a computer, freeing them to contribute to more strategic initiatives.
5. Customer-driven finance and a new lexicon for accountants
Over the next few years, we will see the finance function step beyond its traditional focus areas of cost and compliance, and play a strategic role in the organization. This would mean that finance and accounting will have to be more customer-driven, designing all processes to keep the customer at the center.
This will require all back-office systems and finance to be deeply integrated with other business systems, arming every user, regardless of their role, with relevant information to serve the customer better. In addition to the traditional set of metrics, finance will need to adopt metrics that emphasize customer growth and experience.
6. Self-service finance-governed analytics
We will see the emergence of finance-governed analytics that brings operational, financial and transactional data together in a cohesive manner. With the aid of AI tools like natural language processing, CFOs, accountants and finance professionals can run queries on data spanning an entire organization, supporting operational and strategic decisions.
7. Emergence of the full-stack finance professional
With the evolution of no-code and low-code platforms, accountants and finance professionals cannot just suggest solutions, but also develop them using deep tech to help their organization, removing the over-dependence on IT. This, along with the emergence of self-service analytics, AI and other tools, have paved the way for a full-stack finance professional. A full-stack finance professional will be responsible for managing and minimizing risk and spending, adopting agile finance and maximizing effectiveness, supporting organization-wide decision-making, evangelizing financial shrewdness across the organization, apart from being tech-savvy.
8. Continued convergence of banking and accounting
Banking services have seen rapid development in the last decade. More businesses have started using online banking, and the dependence on brick-and-mortar branches has diminished considerably. Banking services are now being offered through mobile devices, and integrated banking technology is emerging. Accounting and banking are no longer separate entities.
Most modern accounting solutions offer bank integration, making account reconciliation simpler and faster. In the future, as more mobile accounting apps connect with mobile banking apps, business owners might no longer depend on their computers. They could accomplish their banking tasks right from their smartphones.
Prashant Ganti is Vice President at Zoho Corp. Views expressed are the author’s personal.
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