In today’s dynamic business landscape, efficient payment collection methods are more crucial than ever. As companies strive to streamline payment collection, improve cash flow, and enhance customer experience, the right choice of payment methods for businesses plays a significant role in improving their operations.
Prevalence of eNACH in Business Payments
Recurring payment collection is an automated payment processing system that offers consumers and businesses convenience by collecting payments on a recurring basis. They are necessary for various transactions like investments, loan repayments, and bill payments. This can include monthly payments for insurance premiums, OTT subscriptions, loan repayment, utility bill payments, SIPs, and more.
Previously, customers had to wait in long queues to fill out documents and follow their bank’s procedures in order to send these periodic payments. This was a tedious and time-consuming process, which has now been made easy with eNACH.
In association with the RBI, the National Payments Corporation of India (NPCI) launched the electronic National Automated Clearing House, or eNACH, to digitize the paper-based recurring payment collection process.
Governed by NPCI, eNACH is a secure payment method for businesses in India. It replaces conventional paper-based mandates with electronic authorization, significantly enhancing efficiency and reducing the scope for human error.
Businesses use eNACH to collect their customers’ recurring payments, including loan EMIs, insurance premiums, SIPs, utility bills, and subscription fees. It is a practical and effective approach to lower transaction costs, automate payment collections, and lower the chance of a payment failure.
Payment Collection Methods At a Glance
Different payment methods are available for businesses to debit their customers’ accounts based on the transactions or services they avail:
Traditional Payment Methods For Businesses –
- Direct Debit
This is an established method of payment collection where customers grant permission to a business or service provider to pull funds directly from their bank account. Businesses can automatically withdraw a predefined amount from their customers’ accounts to settle recurring payments.
Direct debits are more suitable for businesses that want to collect payments from customers on a recurring basis, making the method ideal for installment payments like EMIs.
It does, however, come with some challenges. For example, obtaining customer authorization can be a cumbersome procedure. The method only offers restricted flexibility. Modifications to payment schedules or amounts may require renegotiation and reauthorization.
- Standing Instruction
A standing instruction is another payment method for businesses where a customer instructs their bank to make regular fixed payments to a specified beneficiary. It leverages the customer’s bank account for the debits, eliminating the need for intermediary platforms.
Customers must, however, contact their bank to begin and set up the standing instructions. In addition, setting up standing instructions involves complex paperwork and authorization processes. Recurring transactions through this method may lack the security features offered by contemporary payment methods.
Modern Alternatives –
- Digital Wallet
Digital wallets are another method used for payment collection that facilitates online transactions, enabling users to make payments and store payment card information through a computer or a mobile device.
These wallets typically store information such as credit card details, bank account information, loyalty cards, and other payment-related data.
Merchants or service providers that support digital wallet payments can set up recurring billing. The digital wallet handles payments automatically at predetermined intervals without the user’s interaction once the recurring payment is set up.
While digital wallets offer convenience, not all businesses or service providers support recurring payments through digital wallets. Some digital wallets may charge transaction fees, impacting the overall cost for both users and companies, particularly for high-frequency or high-value recurring payments.
- eNACH
eNACH, which stands for Electronic National Automated Clearing House, is a system in India designed to facilitate electronic and paperless mandate-based transactions between banks and their customers.
eNACH e-mandates are electronic and eliminate the need for physical paperwork. Unlike traditional methods that may require physical signatures or paperwork, the eNACH-based payment method for businesses enables customers to provide authorization electronically, making the process more efficient.
This method is commonly used for automating recurring payments for regular financial obligations. Once the mandate is set up, payments are processed automatically at predefined intervals.
eNACH vs. Other Payment Collection Methods: A Quick Comparison
Here is a comparative analysis of the recurring payment methods for businesses:
| eNACH | Direct Debit | Standing Instruction | Digital Wallet | |
|---|---|---|---|---|
| Authorization | Electronic and paperless mandates | Paper-based authorization and it involves physical signatures | May involve paperwork and complex authorization | Requires user setup and authorization |
| Flexibility | Allows flexibility in adjusting payments | May require renegotiation for changes | Changes may involve paperwork and reauthorization | Limited flexibility for recurring payments |
| Security Measures | Incorporates robust security features | Secure but may lack sophisticated authentication | Security features depend on the provider | May utilize security measures like biometrics |
| Regulatory Compliance | Adheres to regulatory guidelines | Compliance may vary based on region and provider | Compliance may vary based on region and provider | Subject to regulatory standards |
| Operational Costs | Reduces operational costs through automation | May reduce costs, but paperwork can incur expenses | May reduce costs, but paperwork can incur expenses | Transaction automation fees may impact overall costs |
Streamlining and Enhancing Payment Collection – Why Businesses Prefer eNACH?
Globally, Automated Clearing House or ACH systems are widely used in numerous countries, including the US, Canada, and several European nations. They use ACH to facilitate electronic fund transfers, including recurring payments.
Similarly, eNACH operates within India’s banking infrastructure and regulatory framework. It enables recurring payments by electronically debiting funds from a customer’s bank account based on mandates provided to banks or financial institutions.
In contrast to traditional methods like direct debit and standing instruction and contemporary alternatives like digital wallets, eNACH has emerged as a standout method, offering businesses in India a comprehensive approach to recurring payment collection.
For organizations looking to optimize their payment collection processes and enhance the customer experience, eNACH-based eMandate is a reliable and efficient payment collection method.
Over thousands of businesses in India use eNACH to automate their recurring payment transactions. Here’s why eNACH is considered the best method for recurring payments and is an excellent option for businesses:
- Automated Debit Transactions – eNACH digitizes and automates the entire payment collection process, eliminating human intervention. The streamlined approach saves time and resources for businesses.
- Wide-Range Applicability – eNACH eMandate can process a variety of payment types, including insurance premiums, utility bills, loan repayments, subscription services, and membership fees. It can be used across various industries and sectors, making it a versatile solution for firms of all shapes and sizes.
- Flexibility – Businesses can easily set up recurring payment collections with eNACH as per their specific requirements. They can customize debit frequencies, schedules, and amounts and automate payments for each cycle.
- Regulatory Compliance – eNACH-based payment collection complies with regulatory requirements set forth by governing authorities. This ensures that businesses adhere to legal and compliance standards and minimizes the risk of penalties and legal issues associated with non-compliance.
- Seamless Integration – Businesses can easily incorporate eNACH-based eMandate into their payment collection workflows without the need for significant changes or disruptions in their existing systems.
Simplify Recurring Payment Collection With eNACH eMandates
Businesses looking to improve customer satisfaction and streamline their customer debit procedures will find eNACH to be the ideal solution. It is one of the best payment methods for businesses due to its modern and secure approach to collecting payments.
SignDesk offers a robust eNACH eMandate solution that empowers businesses to optimize their payment collection processes and enhance customer satisfaction. Businesses can streamline their payment collection processes, enhance security, and improve efficiency with this eNACH solution.
Book a quick demo with us today and discover how our eNACH-based recurring payment solution for businesses can simplify your payment processes.
