A helpful guide to how eNACH works and how you can register for it?
About 3 people in 100 have credit cards in India, while there are 930 million debit cards and 1.57 billion bank accounts that are about 80 percent of the total population, that’s the data from January 2019.
Why is this important?
Because if you are a business that depends on customers paying you EMIs or recurring payments. You might want to consider these numbers.
Not that there is a dearth of payment methods that allow you to get recurring payments, we made a list of all those that worked in India, in our article here.
Among all of them eNACH stands out for one reason only, that it works with net banking and debit cards, giving you access to a pool of 930 million people who can potentially use your services, take a loan or buy products on EMI from you.
In this article we will try to summarize everything that we know about eNACH and since we have a product put in some promotion of that too.
Let’s start, well at the beginning!
What is NACH?
Wiki defines NACH as
“A centralized clearing service that aims at providing interbank high volume, low-value transactions that are repetitive and periodic in nature. Offering credit and debt service to corporations, banks, and financial institutions, the service, aimed at integrating all regional ECS into one National Payment System, is claimed to be better than its predecessor, Electronic Clearing Service.“
NPCI’s NACH platform allowed businesses to set up recurring payments on customer bank accounts using a series of forms, documents, and consent, which was to be sent to both business and customer’s banks for processing and took anything between 2 weeks to a month of processing.
Though NACH was not efficient, it helped a lot of customers gain access to products and services that they wouldn’t have been privy to otherwise and allowed businesses to cater to an entirely new segment of customers. This made NACH valuable.
With more people gaining access to debit cards and Net banking and with penetration of internet and UPI among other things NPCI released an upgraded online version of NACH, which was faster, smoother, had almost no rejection and was completely online.
This was eNACH.
What is eNACH?
“National Automated Clearing House (NACH) is a centralized system, launched with an aim to consolidate multiple ECS systems running across the country and provides a framework for the harmonization of standards & practices and removes local barriers/inhibitors. It provides a web-based solution to facilitate interbank, high volume, electronic transactions which are repetitive and periodic in nature. “ Source – NPCI website
eNACH was better than NACH in the sense it was faster and more accurate. Though logically it followed the same process to accept or reject NACH payment on customer accounts. Being paperless has pushed the speed process to less than 3 days.
The following flow diagram shows how eNACH works.
And if you are more interested to know more about different types of eNACH and why it is better, please do take your time to have a look at our post here.
The following flow also gives an idea of how eNACH would work with your point of sales.
Now to the meat of this post.
How can you register for eNACH?
If you are business and are looking at automating your recurring payments using eNACH it makes sense to know how this would integrate into your existing systems. For one the flow diagram shows how it works once you process the transaction at your end.
In this section, we will dive into how it would work when a customer comes into buying a product on EMI or has to pay monthly bills to you.
Step 1: Find a service provider
Before you can get your customers to authorize eNACH transactions over your app or website, you need to have access to you yourself.
One way would be to onboard yourself with a bank and become a service provider yourself which means not only would you be able to setup eNACH for your customers but would also have the opportunity to sell eNACH services to others. But this is not something we can cover in this post.
The very first step would be to find a service provider that can give you the infrastructure you would require to access eNACH payments for your customers. Like the one, we have from Veri5Digital.
Step 2: Create a current account with a sponsor bank
eNACH allows you to debit recurring payments from your customer’s account, this money has to go somewhere! I.e. your current account.
If you already have a current account where you want all your eNACH transactions to land all you need to do is check if the bank you are with is one of 16 sponsor banks live(at the time of writing) on NACH mandates to receive payments.
In case you do not have a current account with any of them, ask your service provider to help you with the same. For example, we at Veri5Digital help our customers integrating with eNACH to get a current account with YES bank.
Additionally, you can access the list of sponsor banks live on eNACH here.
Step 3: Onboard into NACH
Once you have a current account with a sponsor bank, you would simultaneously ask the bank POC to help you onboard into the NACH ecosystem.
Once onboarded you would receive a utility code for eNACH, this is would be necessary for your service provider to setup your eNACH services. Share it with them.
Step 4: Integrate
eNACH is a completely digital process this means you would require a web or mobile app for your customers to access and register for eNACH payment usually at the point of sale.
You would need access to APIs or SDKs of your service provider (like the ones here) which would allow you to connect your portal to eNACH payment system.
Once done you are ready to use the eNACH system for recurring payments.
Step 5: Register Mandates
Once you are done with the steps 1 to 4, you are ready to get your customers to register for mandates. Usually, the form that your customer has to fill would look something like this.
That’s all folks!
Until next time.