A mandate is a standing instruction given by a customer to the bank to allow a specific amount to be debited from your account automatically. Here, automatically refers to the fact that no recurring permission is needed to be obtained by the bank from the customer. An e-mandate is an electronic form of the mandate which is used by businesses to manage various recurring payments in the course of business.

Banks generally would send reminders through mail or phone calls for reminding the customers of their payments and dues. With the introduction of E- Mandate, it has now become hassle-free and less burdening for the banks as well. Hence the introduction of the e-mandate has become a win-win situation for the banks as well as the consumers.

Example of Application of an E-Mandate

Imagine we are in 2001, and you need a personal loan for some emergency that has occurred in the family. You go to the bank and apply for a loan physically. Here, the bank officer will take your application and it goes through various rounds of approval before the application is accepted and the funds are disbursed. The whole process is very time consuming and complex. For the repayment of the same loan, there are EMIs and installments that will be calculated and sent which requires a large time window and the payment modes also need a certain time to be cleared.

The whole process has now become very simple as there is minimum human interaction or intervention required in this process. The EMIs can be paid using the E-mandate and the customers need not worry of housing cheques or insufficient balances etc. The application process is also fully digitized and hence no physical visits to the bank are required.

What are the Advantages of an E-mandate?

Since its introduction, the e-mandate has helped many industries to develop a recurring payments model.

Let us see some of the advantages of E-Mandate:

Reducing friction in payments

For business owners, it is easy to use the e-mandate where you can auto-debit the customers’ account for payments. This reduces the friction in payments and ensures that the payments are made timely by the customers. This also reduces the redundant process of logging in to the business website and paying the due amount.

Customer Retention

If you are auto-debiting your customers’ accounts and easily maintaining the payments cycle, then there are chances that you will retain your customers. The customers on the other hand will get uninterrupted services and products. This helps you build a loyal customer base.

Simple to Use and Access

The process to register for an e-mandate is very easy and you need only the customer’s bank account and details to enroll them for the mandate plan or service.

Reconciliation

E-mandates reconcile the payments and the whole process of collection. It is cheaper to maintain data as the transactions are tracked and captured online.

E-Mandates Transforming Digital Payments

E-mandates have increased the speed of the payments that are recurring in nature. They help in making digital instant payments without sending OTPs or reminders.

  • E-mandates have almost replaced the electronic clearing services system
  • It is fast, easy to manage and completely digital
  • Only one time authorisation is required at the beginning.
  • The e-mandates can be managed in two ways either through individual e-mandate or through NCPI
  • Recurring payments like bills, insurance premiums, and school fees can be automated using the e-mandate
  • Now, UPI mandates can also be used for recurring payments. 

Industries That Have Adopted E-Mandates

There are some industries that have benefitted from the use of the E-mandates in the market. Here are some of them

Wealth Management

The wealth management industry has grown manifold and has met with huge success.This industry requires the customers to make recurring payments towards the investments that they are planning to make. With the e-mandate it has become easy to do this and achieve the financial goals planned for.

Lending Industry

With the introduction of the e-mandate, operating in the lending industry has become a bit simpler. This is because the lenders no longer have to run behind the borrowers for the installments and the due amount every month. The auto-debit feature has helped for the timely repayment of the dues. This has also reduced the turnover time of disbursal. 

Insurance Industry

The insurance industry has a lot of recurring payments for the premiums to be paid. With the e-mandate, it becomes a lot easier to track these premiums and also pay them on time. This reduces your chances of being rejected for an insurance claim.  

Conclusion

E-mandates have made a very positive reform in the world of digital payments. Many businesses that have adopted the e-mandate have seen the advantages of it like customer retention, cash flow benefits and also proper management of finances. The e-mandate has reduced the errors that can occur if you use the physical and traditional methods. 

 

FAQS of What is E-Mandate? How does it work?

1:How does e-mandate work?

With the internet banking or official website of any business, it is very easy to start using the e-mandate. A one-time password is required for setting up of the mandate and after that the payments happen subsequently.

2:How are e-mandates different from ECS?
The ECS is a physical method and involves checking of documents and forms. On the other hand, e-mandates are completely online.

3:Is there any limit for an e-mandate through one account?

No, there is no limit for an e-mandate through one account.