E-NACH and E-Mandate are two payment services that allow those with bank accounts to automate their recurring payments easily. These services allow merchants and customers to manage bills and payments such as insurance, SIP, and utility bills that are recurring without having to manually initiate or process payment. This eliminates the need for manual payments, verification, multiple reminders, or even late fees.
In a nutshell, E-NACH stands for Electronic National Automated Clearing House while E-Mandate is an electronic mandate service which allows customers to schedule regular payments from their bank accounts to be automatically debited on a specified date.
E-NACH and E-Mandate: A Brief History
The importance of E-NACH and E-Mandate can be understood when we take a look at the circumstances that led to its introduction.
Imagine owning an online business (B2B or Saas) that relies on recurring payments such as for a subscription service. Before E-NACH or E-Mandate, these payments were collected manually generally through ECS mandates.
The challenge with this approach was that it was time consuming and expensive. It also left room for error which could result in customers not being able to access their services after payment due to mistakes in processing their monthly payments. This issue was further compounded by the fact that only some banks supported eCS mandates while others did not.
E-NACH and E-Mandate were introduced as solutions to these challenges by helping businesses automate their collection processes and ensuring timely payments from their customers.
How does the ECS mandate process work?
Prior to E-NACH and E-Mandate, ECS or Electronic Clearing Services were used for payments. This is where a mandate is submitted to the respective bank or company through a physical form. The steps were cumbersome and time-consuming. For example, if you wish to invest in a SIP the steps involved were –
You have to register with your bank account number and submit the mandate form to them. You will also need to give them your PAN card details along with your Aadhaar card number. The bank then sends this information along with your name, address, email ID etc., to us.
We validate the details that you have provided us with and based on this we send an e-letter of confirmation to you which includes all details like the amount invested, investment date etc.. This letter is sent by e-mail or SMS depending on how you prefer it.
If you want us to withdraw money from your account we will send an e-notice of withdrawal where you have to confirm whether you want us to do so or not.
You may also like to read out about the electronic payment system.
E-Mandate and E-NACH – what are they?
E-Mandate and E-NACH are the new systems to process payments in India. These are an evolution of the earlier systems that were used to make payments.
E-Mandate is a system that allows you to authorise transactions and make payments using your mobile phone number. You can use E-Mandate if you have an Aadhaar Card linked to your bank account.
E-NACH is a system where the government has outsourced the responsibility of making payments on behalf of beneficiaries to banks and other financial institutions. The government will provide funds for these transactions in advance and all banks will use this money for making payments on behalf of beneficiaries
The government has mandated these two systems, so it is important for us as citizens to understand how they work, so that we don’t get caught unawares when something goes wrong!