e-Mandate is an electronic authorization mechanism wherein a business organization or service provider can collect recurrent payments or effect direct debit from a customer’s bank account or credit/debit card seamlessly and automatically, in the absence of any manual intervention or physical paper-based documentation. It is convenient, secure, and quick for any recurrent transaction.
Businesses need faster automated solutions for dealing with recurring payments. And not just a desire in this era of technology, the need is becoming more evident each day. Now, today we will be viewing a digital solution for MSMEs that would facilitate easy payments on their behalf. This digital payment authorization solution would be known as the e-mandate. E-mandate is the ease of doing normal transactions, for example, repayments on loan, utility bill, or some subscription service.
This blog will discuss what e-mandates are, their benefits for businesses and customers, and the different types available. With e-mandates, managing payments becomes effortless, ensuring smooth cash flow and minimizing delays, which is especially critical for MSMEs. Read on to discover how this tool is transforming payments in India.
What is e-Mandate in Digital Transactions
Technically, an e-mandate is a digital authorization that allows businesses or individuals to automate recurring payments like loan EMIs, subscriptions, or utility bills directly from their bank accounts.
For you, it may mean an agent that erases manual efforts and ensures on-time payments that improve cash flow and reduce delays. e-mandate means that customers can preapprove payments that enhance convenience and efficiency. Meaning of e-mandate is simplifying the regular transactions through secure online processing. So, knowing what is e-mandate becomes imperative for businesses to look for smooth, automated payment solutions that improve the operational efficiency of the business.
There are three formats of recurring payment mandates. Each one satisfies different requirements in terms of authorisation and registration. These are:
API mandate: This type of mandate is registered through APIs. They enable a seamless integration into the banking system for automated processing.
eSign mandate: Customers allow mandates through the Aadhaar eSign process in this format. NPCI recently validated this method. This adds security due to the use of digital signatures associated with Aadhaar.
This is the physical mandate. It is the traditional method, and it requires manual handling. Customers complete NACH forms, which are then routed to banks for authorisation.
Different types of mandates have varying degrees of convenience. Digital options are considered more efficient and secure.
Background: India’s digital journey began with computers in the 1980s. This initiated the digital revolution of the financial world. This transformation was the precursor to credit cards and online transactions. This marked a new era for the nation’s financial infrastructure.
Aadhaar’s launch was a milestone. It gave over a billion citizens a verified digital identity. This opened access to vital social and financial services. This transformation empowers individuals and expands the reach of government programs.
To boost digital adoption, the Indian government launched a suite of digital services. They include Aadhaar eKYC, eStamping, eSignatures, and NACH. These enable safer, smoother digital interactions. Various government initiatives have also played a significant role in fostering digital growth.
A key innovation in this digital ecosystem is the eMandate service. The Government of India and NPCI introduced it. It streamlines recurring payments and supports a more digital economy.
How does e-Mandate in Digital Transactions Work
An e-mandate allows individuals and businesses to automate recurring payments directly from their bank accounts. To start, customers complete the e-mandate registration process by authorizing the service provider through their bank or payment gateway. Once registered, payments are automatically processed on the scheduled dates, ensuring timely transactions without manual intervention. Banks and institutions provide an e-mandate list to track approved mandates. Knowing what e-mandate registration is allows businesses to speed up payments, reduce delays, and improve cash flow through safe, automated digital processes.
How e-Mandate Works
Authorization:
The customer gives authorization to the service provider or merchant to debit their account for recurrent payments.
This authorization is done electronically via internet banking, debit card authentication, Aadhaar OTP, or any other secure means.
Setup:
After authorization, the e-Mandate is set up in the customer’s bank or financial institution.
The customer specifies details such as the maximum debit amount, frequency (e.g., monthly, quarterly), and duration of the mandate.
Transaction Execution:
Payments are debited automatically on the specified schedule without further input from the customer.
How manual mandate process takes place?
The traditional manual mandate process for recurring payments is inefficient. It requires a lot of manual work, resulting in higher failure rates. This procedure requires banks to exchange documents. It delays and complicates payments.
The mandate process by the manual route works this way:
The company or bank asks its customers to sign a form. Customers can have a certain amount regularly deducted from their account.
In this regard, the company/ bank sends this form to NPCI. It creates a Unique Mandate Reference, UMRN. Then it transfers the application to the customer’s bank.
In case the bank approves, then it/the company can begin a recurring debit from the customer’s account.
This manual system takes 7-14 business days for approval. It is prone to high failure rates. These delays can disrupt business, annoy customers, and raise costs.
Benefits of e-Mandate Facility
Convenience and Automation: The e-mandate facility ensures recurring payments like EMIs, subscriptions, or bills are processed automatically, saving time and effort. One of the primary benefits of e-Mandates is the convenience they offer. Once a customer sets it up, they no longer need to remember when due dates fall or manually make payments. The process saves them a lot of time and energy and enables customers to do more important things. Auto-payments have seen a great surge in India since 2023 as a trend, especially considering the convenience and efficiency offered by auto-payments. A report shows that 96% of users find auto-payments more convenient than traditional payment methods?
Dahnal Income Statement Benefits Timely Payments: Automated payments among businesses and customers help avoid any late fee while maintaining a smooth cash flow. e-Mandates significantly minimize the risk of unfulfilled payment as funds can be automatically withdrawn at the due date. That helps in maintaining a good credit score, avoiding fees for late payment, and not putting services on hold from the providers.
Safe Transactions: The entire process involved in e-mandate is heavily secured, assuring safe and secure transactions.
Cost-Effective: By reducing manual processing, e-mandates minimize administrative expenses, making payment handling more efficient.By automating payments, e-Mandates help customers avoid late fees and penalties. Additionally, customers can benefit from discounts or incentives offered by service providers for using automated payment methods.
Transparency and Tracking: Customers can easily monitor all active mandates through their bank’s e-mandate list, ensuring clarity in transactions. e-Mandates provide complete transparency in the payment process. Customers receive notifications and alerts for every transaction, allowing them to keep track of their payment history and stay informed of all account activities.
Reduced Default Risk: Businesses benefit from predictable cash inflows, reducing the risk of payment defaults.
Minimal Fees: Charges on e-mandate depend on the bank, but in general, they are very low and offer a cost-effective solution for automatic payments.
Increased Security: Strong security protocols have made e-Mandates very secure for customers’ financial information. Encryption and multi-factor authentication are used to ensure that transactions are safe, hence less likely to have frauds.
Environmental Impact: Customers ensure environmental conservation since e-Mandates are computer-based, removing the use of paper-based mandates. The usage of paper causes carbon footprint which is associated with traditional payment process; hence e-Mandates are more friendly to the environment.
Key Features of e-Mandate
Paperless: A fully digital procedure, thus completely done away with physical forms and signatures.
Eases Convenience: Customers do not have to worry about processing individual payments for repeated expenses such as subscriptions, loans, or utility bills.
Security: Transactions are authenticated through secure means such as OTP, debit card PINs, or biometric authentication.
Automation: The merchant can automate the payment, thus avoiding delay or missed payments.
Flexibility: Customers can set limits, modify, or cancel the mandate according to their requirements.
Use Cases of e-Mandate
Subscription Services: For OTT platforms, gyms, or magazines.
Loan Repayments: Automating EMIs for home loans, car loans, etc.
Utility Bills: Automating payments for electricity, water, gas, and phone bills.
Insurance Premiums: Ensuring timely payments for insurance policies.
E-commerce Platforms: For recurring purchases or installment payments.
Different types of e-Mandate
Credit e-Mandate: This type allows payments from external sources to be directly credited to your account. It’s particularly useful for business owners who receive recurring payments. Additionally, it can be used to automate the crediting of loans, interest payouts from Fixed Deposits, and similar transactions.
Debit e-Mandate If you have already availed loan or invested in mutual fund SIP, then you already must be enjoying the debit e-mandate service. Under this e-mandate, an automatic debit will occur from your bank account as a predefined amount after a stipulated date. Such a service can help avoid missing or delayed payment.
Eligibility Criteria to open the e-mandate
A valid Aadhaar card.
You need to have a bank account with a provider that supports the e-mandate facility.
Check if your financial institution is authorized to provide NACH services.
Ensure that your mobile number is registered with your Aadhaar card and bank account, so verification happens smoothly.
How to Apply for an e-Mandate
Select a Service Provider: Choose a provider that allows the e-mandate facility for your recurring payments.
Fill the e-Mandate Form: Enter the necessary information and submit the application.
Approve the e-Mandate: Approve the e-mandate process by giving consent through the provider’s digital platform.
Recurring Payment Option
The e-NACH eMandate process seeks to make recurring payments easier. This is achieved through the elimination of paperwork. The system eliminates the need for paper NACH forms and the transfer of documents between banks.
It enables faster and more efficient mandate registration.
The electronic NACH process reduces human intervention. Mandates can be registered within hours thanks to it. NPCI’s NACH platform automates the workflow. This boosts efficiency.
Key participants in the eNACH process include:
NPCI: The National Payments Corporation of India regulates retail payment systems in India. It was set up by the Reserve Bank of India (RBI) and the Indian Banks’ Association (IBA).
Sponsor Bank: These banks are approved by NPCI to initiate the eMandate process. At present, HDFC, HSBC, and Punjab National Bank are sponsor banks.
Destination Bank: This is the customer’s bank. Funds will be debited from it according to the mandate.
Corporate Entity: This is the company or bank that initiates the eMandate. It enables them to automatically collect payments from the customer’s bank account.
Customer: The one who sanctions the eMandate. It enables the auto-debits from his/her bank account periodically.
e-Mandate in India
In India, RBI (Reserve Bank of India) has made rules for e-Mandates to ensure security and customer protection as well:
Two-Factor Authentication: The first setup and subsequent transaction must contain two-factor authentication, such as OTP.
Transaction Limit: Above ₹15,000 transactions are subject to customer consent.
Notifications: Customers are intimated in advance before every debit.
Opt-Out Option: The mandate can be cancelled by the customer at any time.
e-Mandates are usually settled through platforms such as NPCI’s NACH and card networks like Visa, Mastercard, and RuPay.
Features of E-Mandate
E-Mandates have a number of important features that make them efficient and reliable for automating recurring payments. These features include:
Automated Process: E-mandates automate the entire payment process, from initiation to transaction execution. This removes the need for manual intervention, ensuring payments are made on time without any action required from the customer.According to a survey, over 60% of consumers said automation reduces their chances of missing payments.
(Source: State of India Digital Economy)
Multi-Platform Accessibility: e-Mandates can be set up and managed through a variety of channels, including online banking, mobile apps, and even physical branches. This makes it easier for customers to manage their mandates from anywhere at any time.
Real-Time Authorisation: The e-Mandate system ensures real-time authorisation and processing, which means that payments are executed immediately on the due date. This eliminates delay and ensures timely payment to the service providers.
Integration with NACH: The e-Mandates are fully integrated into the NACH system ensuring standardized and secure processes across all participating banks and financial institutions in India.
Rigorous Security: Advanced security practices such as encryption and multi-factor authentication are used to protect customers’ financial data while preventing unauthorized transactions.