Why streaming apps are worried about RBI's auto debit rules

Under the new rules, all recurring transactions will need additional authentication. For payments exceeding ₹5,000, a one-time password (OTP) will have to be validated by a customer each time a payment is made.

Typically, video streaming services’ monthly plans are cheap, but the platforms are still anxious as all automatic payments will require customer approvals when an alert is generated. This would make the process cumbersome, affecting consumer experience, especially if they have subscribed to multiple services, executives at streaming platforms and media analysts said.

Streaming services said that at least 10-15% of customers who directly subscribe to streaming services and do not receive them as part of a package from a telecom operator may either not have the time to renew their subscriptions or choose not to do so. This may pose a challenge, particularly for niche, language-specific platforms that are only beginning to find their feet.

“We’re anticipating a fall in subscription renewals and payments, and there is a lot of concern internally at all OTT (over-the-top) platforms," a senior executive at a streaming service said, declining to be named.

The pandemic has already stressed people’s finances, and now a more onerous customer experience may make them forgo their entertainment expenses. Smaller, regional language platforms maybe hit more than the bigger foreign video-on-demand services, the executive said.

Karan Taurani, senior vice-president, Elara Capital Ltd, however, expects the impact to be significant for players such as Netflix, 25-30% of whose overall subscriptions are paid for directly and not as part of telco bundles that services with lower brand recall prefer. “The other result could be in terms of customers becoming more selective with platforms that offer big-ticket content seasonally, such as Hotstar with the IPL," Taurani said.

Netflix, Disney+ Hotstar, ZEE5 and ALTBalaji declined to comment on the impact of RBI’s move. Amazon Prime Video, Hungama and Eros Now did not respond to Mint’s queries. DTH (direct-to-home) service providers like Tata Sky and Dish TV, whose renewals may also be impacted, didn’t respond either.

Calling the new rules regressive, a regional OTT platform owner said the move “would be extremely cumbersome for the consumer, and more so for businesses, which will now need to follow up with users every time a recurring payment is due, adding to the already frustrated consumers’ list of to-dos".

“With a plethora of subscription plans and a whole bunch of apps, it is difficult for consumers to keep track of their plans and payments. I think something like a consolidated subscription app or renewal system or one gateway would really help," Abhishek Jain, co-founder of video streaming service OHO Gujarati, said, adding that the platform clearly asks customers for consent to the auto-renewal feature.

To be sure, the RBI said earlier that the step is aimed at ensuring the safety and security of digital payments and preventing fraudulent transactions.

While the new rules will likely help boost security, transparency and offer more control to the customer, on the one hand, it will affect subscribers who are paying post-paid phone bills that bundle other services through the auto-debit feature, said Ramesh Narasimhan, head, digital commerce, Worldline India, a company offering payment solutions for physical and online businesses.

While media industry analysts expect over the top renewal rates to decline, the platform owners are expected to introduce more long-term packages instead of monthly ones, which may demand higher commitment from users, they said. Other innovations that would be introduced in pricing include offering free bundled subscriptions to retain customers, the analysts said.