8 in 10 Indians support RBI’s move to stop auto-debit taking place via various app stores
- ● Consumers had escalated the issue with the Government via LocalCircles multiple times since 2017
- ● Only 23% consumers who paid for apps in last 12 months said they went through OTP authentication process
- ● 46% consumers who paid for apps in last 12 months say they have been wrongly charged or over-charged
October 28, 2021, New Delhi: Technology has allowed users of smartphone, tablet, laptop and desktop to utilise internet for myriad of activities through the use of applications that can be downloaded from Google Playstore, Windows Store and Apple Appstore. The popularity of these technologies amongst Indians has pushed the country to become the fastest growing app economy in the world. Indians are buying apps from these stores and many over the last 4 years have been facing the issue of auto-debit by foreign vendors.
After consumers raised the issue of auto-debit by foreign vendors on LocalCircles in 2017 leading to unauthorised charges over a long period of time, a survey in February 2018 conducted by the platform indicated that consumers wanted OTP to be made mandatory on all foreign card transactions. The same was escalated to the Reserve Bank of India (RBI) and other arms of the Government for intervention.
To address the issue, the RBI has mandated from October 1, 2021 that all kinds of recurring or auto-debit payments will require customer’s consent before they are cleared. Customers who want a standing instruction in place for recurring payments will have to register for e-mandate at the merchant’s site for the first transaction, with a validity period and maximum amount. Also, mandate registration, modification and deletion will all require additional factor authentication (AFA). Also, transactions for an amount greater than INR 5000 will have to go through AFA.
To understand the magnitude of the issue of unauthenticated auto-debit charges by foreign vendors and whether this move has the support of consumers at large, LocalCircles conducted a national survey which received over 40,000 responses from consumers located in over 302 districts of India. 48% respondents were from tier 1, 27% from tier 2 and 25% respondents were from tier 3, 4 and rural districts.
Only 23% of Indian consumers who paid for apps on Google Playstore, Apple Appstore and Windows store say they went through the OTP-based authentication transaction for their app purchases
The first question in the survey tried to understand how app stores are charging consumers on a monthly or annual basis for the apps that they are using. In response, only 23% said they pay their subscription fee based on OTP that authenticates their payment. 46% said their app store charges them on an “auto renewal” basis, either monthly or annually, as a subscription fee—or, without the use of OTP-based authentication for the transaction—for using its service or product. Another worrying concern is that 31% of consumers surveyed said they either “don’t know” or “can’t say” how app stores are charging them for any subscription they may have opted to use. It should be noted that most of the time, consumers only tend to use some application, such as a game or utility software app per se, and pay a certain amount as a trial fee to get started. However, many of them may use it only for a while. Nonetheless, such consumers continue to get charged by the service provider, either on a monthly or on yearly basis, for failing to unsubscribe from using its service. The question in the survey received 8,745 responses.
Only 19% of Indian consumers who paid for apps on Google Playstore, Apple Appstore and Windows store say they were invoiced or billed by an Indian entity
The next question in the survey sought to understand from consumers if applications they use raise the invoice. In response, 48% said “don’t know”. Breaking down the poll, 33% said the applications they use are billed by a foreign entity. Only 19% of Indian consumers who paid for apps for Google Playstore, Apple Appstore and Windows store said they were invoiced or billed by an Indian entity. This poll in the survey received 8,172 responses.
Only 29% smartphone users have 1 or more paid apps on their phone
There’s not an ounce of doubt that smartphones have enabled users to try out and experience services of various applications, from games to movie streaming and from utility software to online education – many who bill their customers either on a monthly or on an annual basis. The following question in the survey that asked consumers the number of apps they have purchased or paid for in the last 12 months, 29% said they have 1 or more paid apps on their phone. The majority of 71% said they “did not use any paid apps or used only free apps”. Another 4% of users couldn’t say. The question received 9354 responses.
46% of Indian consumers who paid for apps on Google Playstore, Apple Appstore and Windows Store say they had a wrong charge/overcharge issue in the last 12 months
It may happen that with the ease of paying for an application, some consumers end up paying for downloading a wrong application per se, other than the one he or she intended to buy. However, appstore providers allow consumers to get a refund, but it depends upon the payment policies of the service or app provider. The third question in the survey asked Indian consumers if they have been wrongly charged or overcharged by app stores in the last 12 months for purchasing an app or for subscription renewal. In the question that received 7840 responses, 14% of consumers said they “don’t know”. The majority of 40% of consumers said “No”, they haven’t been charged wrongly or overcharged. However, there were 34% who said “Yes, once or twice”, while 12% said they’ve been charged many times.
83% of Indian consumers who paid for apps on Google Playstore, Apple App store and Windows Store support RBI to mandate OTP-based authentication for all app purchases and renewals
Verification via OTP is an additional security layer to minimise the risk of digital frauds while using internet banking or other electronic payment methods. Earlier, payment aggregators gave credit or debit card users the option of using ATM PIN number to validate or to complete online transactions. This way, the person's ATM PIN was always available online to the aggregator or payment gateways. The new RBI auto-debit rules that have come into effect from October 1st, 2021, require banks to send an OTP to customers for authorisation of recurring payments as part of the mandatory 2-factor authentication for approval. This means that all apps that a consumer may be getting charged for will have to be freshly authenticated by the consumer. This will lead to putting at least a one-time end to any unauthenticated charges for apps a consumer may be facing.
The next question tried to understand if consumers support the RBI mandate where app stores are now required to mandatorily implement OTP-based authentication for “any charges” levied on users located in India. In response, only 10% of app consumers said “No”, while 7% said “can’t say”. Notably, 83% of Indian consumers voted “Yes”, and support the RBI to mandate OTP-based authentication for all app purchases and renewals. The question in the survey received 7719 responses.
In summary, only 23% of Indian consumers who paid for apps on Google Playstore, Apple Appstore and Windows store say they went through the OTP-based authentication transaction for their app purchases indicating many were on the auto-debit program on their domestic and international apps. The survey indicated that only 19% of Indian consumers who paid for apps on Google Playstore, Apple Appstore and Windows store say they were invoiced or billed by an Indian entity while only 29% of smartphone users have 1 or more paid apps on their phones. The survey also revealed that 46% of Indian consumers who paid for apps on Google Playstore, Apple Appstore and Windows Store say they had a wrong charge/overcharge issue in the last 12 months. The RBI’s mandate for banks, card networks and vendors to comply with additional factor authentication for customers' recurring payments through debit and credit cards effective October 1st, 2021 will definitely resolve issues for those consumers experiencing unauthenticated charges from app stores. That is precisely why 83% of Indian consumers who paid for apps on Google Playstore, Apple App store and Windows Store support RBI to mandate OTP-based authentication for all app purchases and renewals.
The survey received close to 40,000 responses from citizens residing across 302 districts of India. 48% respondents were from tier 1, 27% from tier 2 and 25% respondents were from tier 3, 4 and rural districts. The survey was conducted via LocalCircles platform and all participants are validated citizens who had to be registered with LocalCircles to participate in this survey.