If you’ve set your credit cards up for automated billing every month, then know that it is possible because of the NACH mandate. This is just one example, NACH has numerous other applications and benefits which we will discuss in this article!
What is NACH and Why Use It?
National Automated Clearing House or NACH is a web-based solution for financial institutions, banks, corporations and the government that is launched by the NPCI (National Payments Corporation of India) with an objective to facilitate high-volume digital transactions that are periodic and repetitive in nature.
About the uses, the NACH facility is mainly used for making high-volume or bulk transactions for the distribution of dividends, subsidies, salary, interests, pensions, and so on. Not just that, NACH systems can also be used for the collection of online payments for loans, insurance premiums, mutual funds investments, utility bills, etc.
Main Objectives of NACH
NACH is basically an upgraded version of ECS. It replaced ECS (Electronic Clearing Service) in 2016. In order to give an auto-debit instruction from your account, you need to use NACH functions.
Below are the main objectives of NACH systems:
- To devise a system with a broader pan India coverage to process high volume digital payments smoothly.
- To increase efficiency of handling credits, debits, refunds, rejections and reveals.
- To offer direct corporate access to the selected users
- To improve governance by linking the AADHAR number to IIN (Institution Identification Number) and introducing a mandate management system.
What Is NACH Mandate?
NPCI launched e-Mandate services with an aim to cut overall processing time, streamline and automate the repetitive or recurring payments.
NACH Credit is launched by the Reserve Bank of India for large organizations and corporations so that they can make bulk payments in a hassle-free way. Any business or organization authorized under RBI can use NACH Credit to send a large number of payments to several recipients at the same time.
One can easily authorize the recurring payments with NACH mandate using their debit card or netbanking details. Further, you can click here to know more about NACH mandate.
Features of NACH Mandate Management System
The Mandate Management System (MMS) is an important part of the NACH system. Below are some of its main features :
- Enhanced synchronisation between services providers and banks
- Automatic processing of electronic mandate information
- Standard mandate form facilitation
- Unique number for easy tracking of mandates
- Improved governance and well-defined time limits
Common Types of Transactions Facilitated By NACH Mandate
NACH is used for making both direct credit as well as direct debit transactions.
- Direct Credit: Distribution of subsidies, Salaries, pensions, dividends to the selected stakeholders at a predefined frequency.
- Direct Debit: Payments concerning insurance premiums, loans, recurring or fixed deposits.
So, this was all about NACH, what it is used for, what are its features and key objectives. Now, let’s discuss the most important part – The benefits of the NACH Mandate!
Benefits of NACH Mandate / e-NACH or e-Mandate
NACH mandate offers numerous advantages to business owners as well as their customers. It not only saves time but also offers added security and convenience to its users. Below is how the NACH mandate can help merchants and theirs customers:
Benefits For Merchants
1. Customer Retention
The biggest benefit offered by NACH mandate to online merchants is customer retention. The one-time digital authentication feature of e-Mandate allows you to set up an auto-debit mechanism to your customer’s account at the beginning of every billing cycle.
With this feature, customers don’t have to authenticate a recurring payment again and again and hence, they enjoy your services and products while staying loyal to your brand.
2. Reduces Overall Operational Cost
Merchants can enjoy a significant reduction in the operational cost related to invoicing and accounts payable. Not just that, they can minimize the chances of late payment penalties. Further, by automating the transaction management, accounting becomes easier and error-free. You can even save on the upfront cost as the entire process is digital.
3. Enhanced Security
Security is the biggest concern for the merchants as well as the customers. Merchants have the responsibility of keeping their customers’ financial information and other sensitive data safe on digital payments networks. If the system is not secure, you can lose the trust and loyalty of your customers.
NACH mandate enhances security by aiding to PCI compliance which is strictly managed by the payment service providers.
Benefits For Customers
1. Smooth and Undisturbed Services
As a customer, you don’t have to authenticate your subscription every single month or whenever your billing cycle starts. You only need to authenticate once and enjoy the services forever, until you cancel the subscription, of course!
Not to mention, you don’t have to deal with annoying payment reminders.
2. Flexible Options
With subscriptions, customers are provided with numerous options. They can choose any plan they like and cancel it anytime they want. It enhances the customer experience and provides them with the peace of mind they need.
3. Ease of Use
Authenticating a subscription is an easy process. You just need to put your net banking details and you’re all set.
NACH mandate is very helpful for businesses and customers. It offers several advantages like cost and time reduction, hassle-free bulk payments, enhanced security, automated processing and many more.