The transition from the ECS to the NACH system resulted in a variety of positives for recurring payments in India. Mutual Fund SIPs, Loan EMIs, Insurance Premium payments became much simpler and less time-consuming.
Today, we're reviewing the two different mandate types under NACH, the mandate registration and presentation process for both, and all the ways it can be made less complicated.
First, let's take a look at how NACH has made all of our lives easier:
- NACH consolidates all ECS systems running in the country to eliminate local barriers and make way for a more efficient, faster clearing system given the large number of monetary transactions that take place on a daily basis.
- NACH drastically reduces the need for paperwork, manual verification, thereby cutting down on processing timelines.
- NACH significantly cuts down on processing timelines. ECS mandate registrations took up to 30 days. Under NACH, this is cut by half to 15 days. ECS payment settlement usually took 3–4 days, while NACH settles payments on the same day.
Before we get started, let’s review the terms that’ll be used frequently in this post.
- Mandate: A bank mandate is an authorization given to a bank or financial institution (a broker, fund house, lender, etc.) to debit your bank account for recurring (or one time) payments. The payer’s physical signature is required to authenticate the mandate and is sent by the financial institution to your bank for registration on your behalf. Once the mandate is registered with your bank, the bank will allow the institution to withdraw the amount at the frequency pre-defined, or as and when the mandate is presented.
- eMandate: An e-mandate is a digitized version of a physical mandate. The user needs to fill in the e-NACH form and can use either their NetBanking or Debit Card details to authenticate the mandate. Once a bank/merchant is authorized/approved, the recurring payment debit is completely automated and all payments will not require user intervention.
- Sponsor Bank: This is the corporate or payee’s (financial institution) bank
- Destination Bank: This is the end-user or payer’s bank
- Turnaround Time (TAT): Simply put, TAT refers to the time in which a certain process is completed. It is usually expressed in the form “T + x”, where “x” refers to the additional number of days from when the process is initiated (T).
- Presentation: Once a mandate is successfully registered, the amount is debited from the payer’s bank account as defined in the mandate. This is referred to as mandate presentation.
With the NACH system, mandates can be of two types:
Physical NACH: Manually filled mandate form, authenticated by the payer's physical signature
API eMandate/eNACH: Mandate information automatically captured by API, authenticated by payer's net banking or debit card details
The registration processes for these two types of mandates differ. Let’s take a look at each.
Physical Mandate Registration Process
The Challenge
Although NACH is a significant upgrade to the old ECS system, the physical NACH mandate registration process is still riddled with certain inefficiencies:
- Manual Data Entry & Verification
The mandate form is filled in manually by either the payer (customer) or by an agent assigned by the corporate in consultation with the payer. As with most manual processes, this is prone to human error. Incorrect data entry can be costly, resulting in delays and mandate registration failures.
- Heavy Reliance on Logistics
The mandate moves from the customer to the corporate to the corporate’s sponsor bank before it is digitalized. Since the mandate is a physical form in these stages, there is both significant manpower and time consumed in transporting this singular piece of paper.
- Matching NPCI-defined Image Specifications
The Sponsor Bank must ensure that the mandate image and data that they pass on to the NPCI meet NPCI’s pre-defined specifications. This, again, is prone to human error and can result in the rejection of the mandate.
- Drawn-out Turnaround Time (TAT)
Between the generation of the UMRN to when the mandate is registered, the NPCI-defined TAT is T+10 days (Step IV to VI). Looking at the overall process, and considering the Lead Time (Step I to III), we’re looking at a timeline of close to 15–20 days. Since the corporate cannot take any action until the mandate is registered, there is a significant delay in the business flow.
- Inability to Monitor/Track the Registration Status
What makes matters worse is that there is no way to track the status of the mandate registration. Resulting, again, in the halt of business flows.
The Fix
Enter DigiCollect, a product that digitalizes the physical mandate registration process and successfully eliminates each of the challenges listed above. Here’s how:
→ Manual Data Entry & Verification
DigiCollect allows corporates to digitally pre-fill the mandate form, eliminating data entry errors.
→ Heavy Reliance on Logistics
Corporate agent/customer simply needs to scan QR + take a picture of mandate & upload it to Digio (API, App, UI). Digio uses best-in-class Optical Character Recognition (OCR) for scanning the mandate and signature detection.
→ Matching NPCI-defined Image Specifications
Digio uses AI-based image processing at the backend for cropping, skew, rotation, etc., then creates the mandate and sends it to bank & NPCI.
→ Drawn-out Turnaround Time (TAT)
Brings down TAT from T+10 to T+4.5–5 days.
→ Inability to Monitor/Track the Registration Status
Real-time mandate status and MIS reports available on the Digio Dashboard.
eMandate Registration Process
The Challenge
The eMandate registration process is noticeably less convoluted than the physical mandate process. The elimination of the need for a physical mandate form brings down the defined TAT from T+10 days (in the physical mandate registration case) to T+2 days. However, in addition to the difficulty of monitoring the registration status; integration and connectivity with NPCI, keeping up with all updates and changes in certifications, and even the collection of Personally Identifiable Information (PII) can prove to be quite a burden
The Fix
With host-to-host connections with several Sponsor Banks, DigiCollect offers a Plug-n-Play Mandate form that is integrated with the NPCI platform. The mandate fields and customer-related data is pre-filled on the form via API. This form can be sent to the customer for authentication (Net Banking or Debit Card details) via an email or SMS link or opened as a widget from a corporate application. The Digio Dashboard allows for the tracking of the registration status along with timestamps and offers Webhooks for real-time updates in API formats.
Monitoring Mandate Registration Status
One of the biggest challenges with both physical and electronic mandates is the general inability to track the status of their registration. Digio’s Mandate Book is a one-stop suite for all modes of NACH mandates, allowing you to track the status, download MIS, and search for mandates.
Mandate Presentations (Debits)
Once a mandate is successfully registered, the payment is debited according to the defined frequency. With DigiCollect, debits can be scheduled according to the business requirements, a one-time API call can be set up for the whole payment cycle, and can be paused, resumed, or canceled at any point.
Sometimes, the NACH debit fails. The primary reason for this failure is often an insufficient balance in the payer’s bank account. Accounting for this, DigiCollect has provisions whereby a payment link is sent or auto-triggered for collection via alternate instruments such as UPI, debit and credit card.
Subscription Payments
To avoid all these operational overheads, it’s much easier to have one point of contact. Digio’s subscription plans make recurring payment collections very straight-forward, with provisions for both fixed and variable debits.
Use DigiCollect for an easy-to-use solution for recurring payments. Create, register, present, and monitor mandates (whether physical or electronic) through a single interface and mitigate unnecessary delays in business flows and customer inconvenience.
For more information, or to request a demo, please feel free to reach out to us at support@digio.in.
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