How New Rules Will Impact Recurring Transactions in India

FastSpring
Estimated read time: 4 minutes, 6 seconds

If you’ve noticed a drop in subscription credit card approval rates for customers located in India, you’re not alone.

The Reserve Bank of India issued new guidelines for subscription purchases earlier this year â€” and the new rules came into effect a few days ago, on October 1, 2021. 

As we’ll describe in this article: 

  • The Reserve Bank of India is enforcing new data storage rules.
  • Automatic rebills will no longer be allowed.
  • Companies must notify customers at least 24 hours before the next billing cycle.
  • For previous subscription customers, FastSpring sellers do not need to do anything to retain those subscriptions.
  • FastSpring-powered stores will need a new storefront to accept new subscription purchases from India. (This process is straightforward, and we describe it in detail below.)

Here’s what you need to know;

Note: Not a FastSpring seller but need help complying with the new regulations? FastSpring can help! Book a demo or create an account today

The Reserve Bank of India Is Enforcing its Rules Effective October 1, 2021

The Reserve Bank of India first issued its directive related to subscription charges in 2019.

The new regulations were scheduled to take effect in April of 2021. They were pushed back to October after some banks and financial institutions reported that they were not prepared to comply. 

There was speculation that the reserve bank would push its deadline back again, but that didn’t happen.

According to internal FastSpring data from a variety of sources, SaaS and software companies are now seeing up to a 30% drop in subscription approval rates for both credit and debit cards in India — a sign that Indian banks are beginning to refuse transactions that are not compliant with the new regulations.

1. Automatic rebills will no longer be allowed

The old way of managing subscription rebills will no longer work in India. 

Stores, financial institutions, and payment gateways will not be allowed to store credit or debit card data for the purpose of automatically rebilling that card every month for a subscription. 

As a result, SaaS and software companies will need to use a tool to notify subscription customers at the end of each billing cycle so they can renew for the following month.

2. Companies must notify customers at least 24 hours before the next billing cycle

Subscription customers in India must be given at least a 24-hour notice before the start of their next billing cycle. 

3. Manual rebills will be the best way to maintain compliance

Manual rebilling is the process of emailing customers each month with a request to manually make their next payment.

FastSpring’s engineering team has created a process to make this change as easy as possible for both you and your customer, as we describe below.

How Do I Protect My Subscription Revenue While Staying Compliant?

For FastSpring stores, there are two types of subscriptions to consider as you adjust to the new rules:

  1. Existing subscription customers from India
  2. Future subscription customers from India

1. Your existing subscribers have already been moved to manual rebilling

At FastSpring, we are updating our subscription system to help you retain as much subscription revenue as possible from Indian customers under the new regulations.

Specifically, for any existing subscription created prior to October 1, 2021, our system will now automatically send rebill notifications to your Indian customers to prompt them to pay their bills each month.

These updates are already live in your store and managed by us automatically.

2. Easily set up a new Storefront for new Indian subscription customers

For future customers from India, FastSpring sellers will need to create a new popup storefront or web storefront using the instructions in our help documentation.

Storefronts are a subset of your larger store. They can be customized with unique rules for customers in one country — in this case, India.

  • Click on “Create New Storefront”
  • Enter the name of the storefront (e.g. mystore-in)
  • Route all your traffic from India to this storefront
FastSpring popup storefront

Once you’ve set up a new storefront, choose manual renewal subscriptions to manage all subscription purchases from this point forward.

What to Do if Your Payment Processor Isn’t Automatically Compliant

As a Merchant of Record provider, FastSpring’s service includes help with compliance for issues just like this one.

Many payment processing services do not help with compliance, however, which means you may be forced to rebuild your subscription stack to send reminder emails for subscription payments from India.

Indeed, the 30% drop in approval rates we see in our data shows many of these transactions are already being blocked.

If you have a large Indian customer base, this change may cause a significant amount of development work for your team — depending on your current subscription and finance stack.

Note: FastSpring is the No. 1 full-stack commerce platform for SaaS and software sellers worldwide! Book a demo or create an account today to see how we can help you grow your software business.

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