Failed Transactions: Whose Responsibility?

The ongoing spread of COVID-19 is changing consumer behavior and expectations in a big way, particularly when it comes to using digital tools for financial transactions.

The World Health Organization (WHO) in March immediately after the outbreak of the pandemic advised countries “to use contactless payments to reduce the risk of transmission”. Many businesses quickly responded to the call and stopped accepting cash and moved to either online or contactless tap-and-go payments. Needless to state that cashless payments, when the basic infrastructure is in place and the recipient has a bank account, are faster and easier.

As far as banking operations are concerned, the COVID-19 pandemic has boosted tech-driven offerings by banks and also led to a surge in digital transactions as customers stay away from branches. The first quarter data of the current financial year provided by major banks reveals that the share of alternative channels in the total transactions has increased to over 90 per cent in the first quarter ended June 30. There are banks which reported over 90 per cent of savings account transactions in the first quarter were through digital channels.

The Covid’s positive impact reflects that even the traditional payments made in cash to the vegetable vendor and the hawker selling newspapers have gone digital now because of the fear of touching currency notes due to coronavirus. Notably, the RBI’s advisory to use digital means and the Government’s measures, such as allowing Near Field Connectivity (NFC) that permits touch-free transactions on cards, are pushing retail customers to go digital.

Actually, integration of technology into banking operations has revolutionised (and continues to transform) customer service in banks to new levels. But there are technology hiccups which have become order of the day leaving  customers in a state of helplessness. More than the technological glitches, it’s the lack of proper response from the banks which leaves customers disillusioned.

All of us know cash withdrawal through automated teller machines (ATMs) is one of the oldest wonderful facilities defining the power of technology. This ‘anywhere and anytime’ banking facility, giving access to cash, brought dramatic changes in the banking operations and at the same time changed the spending behavior of consumers. Even as it facilitated the customers to access their accounts remotely and conduct cash transactions, at the same time ATMs reduced footfall at bank branches to a large extent.

Even as more delightful facilities like online banking, mobile banking etc. revolutionized the banking operations for its kind of ease and convenience, ATM s continue to remain darling of customers. Volume of transactions may have gone down, but these machines are not out of race when it comes to ‘anytime & anywhere’ access to cash.

However,  over a period of time, frequent technical glitches coupled with cash starvation have marred, if not the credibility but at least dependability aspects of ATMs. Simply, today’s customers don’t trust ATMs. Stories of ‘fear’ of transaction failures among customers while using an ATM have become common. Instances galore where customers went to an ATM location, followed all steps to withdraw cash and the machine failed to deliver it. It’s here the customer gets panic when he finds his account stands debited by the amount which he never received from the machine. Later it takes weeks and even months for the customer to get back his/her money into the account. However, not all customers are so lucky. There are many who continue to struggle to get their money credited back to their accounts.

This may be a small technical malfunction of the ATM or the connectivity driving the machine, but this small issue has cropped up as one of the popular reasons of customer dissatisfaction. The customers have to literally beg to banks to credit the amount back to their accounts. Notably, the problems for such transaction failures compounds if it happens at other banks’ ATMs.

What is a failed transaction and what should a customer do in such situation?

A failed transaction is one which has not been fully completed due to any reason not attributable to the customer. The transaction failure can happen due to failure in communication links, non-availability of cash in an ATM and time-out of sessions. Failed transactions shall also include the credits which could not be effected to the beneficiary account on account of lack of full information or lack of proper information and delay in initiating a reversal transaction.

In such situation, the customers have to immediately approach their home branch of the bank and lodge a complaint about failure of  the transaction.

Notably, the Reserve Bank of India or RBI has put in place a set of rules to deal with failed transactions.

What are the RBI guidelines?

According to the RBI’s latest guidelines, in case of ATM transactions where customer’s account has been debited but cash not dispensed, the banks have to reverse the failed transaction within a maximum of transaction date (T) + 5 days. If the banks fail to reverse the transaction in T+5 days, they have to pay a compensation of Rs.100 per day of delay beyond T + 5 days to the credit of the account holder.

In case of failed debit card to debit card transfer where the customer’s card account has been debited but the beneficiary card account not credited, the banks have to reverse the transaction within within T + 1 day. If the transaction is not reversed or if amount is not credited to the beneficiary account within this time period, Rs.100 per day compensation has to be paid for delay beyond T + 1 day.

At point of sales (PoS) debit card transactions, including cash at PoS, if the customer’s account has been debited but confirmation not received at merchant location (charge-slip not generated), the transaction has to auto-reversed within T + 5 days. Otherwise, a compensation Rs.100 per day of delay beyond T + 5 days has to be paid.

The RBI guidelines also envisage that the same rules apply to a failed transaction at card not present (CNP) or e-commerce transactions. Notably, in case of a failed IMPS transaction, if the account has been debited but the beneficiary account is not credited, auto-reversal has to done by the bank by T + 1 days. Otherwise, compensation of Rs.100 per day has to be paid.

What is the recourse for disputed digital transactions, especially when a service provider (bank or any financial institution) is not responsive to the satisfaction of the customer?

For disputes like transactions through e-wallets or other payment service providers regulated by the RBI, you can now take up the matter with the ombudsman for digital transactions. The ombudsman scheme covers broad categories of digital transactions, including failed transactions and where the amount has been debited from the user’s account but not credited to the customer’s account.

What is this Ombudsman Scheme for Digital Transactions?

Ombudsman scheme for digital transactions is a dedicated apex level authority to expedite the process of complaint resolution. Now complaints like unauthorised electronic funds transfer, customer’s inability to transfer the funds to bank account, not loading funds into the wallet within a reasonable period of time, failure to effect online payment or fund transfer, failure to refund your money in case of a failed transaction, and not implementing stop-payment instructions within the specified time-frame can be filed with the Ombudsman for resolution.

How this Ombudsman can be reached?

Reaching to Ombudsman with any disputed digital transaction in your account, you have to first file your complaint with the concerned bank/financial institution. In case of no or unsatisfactory response from the service provider, you can approach to the ombudsman within one year from the date of rejection of your complaint. You have to file your complaint to the ombudsman under whose jurisdiction the banks/ FIs office is located. The complaints can also be filed online. You can seek address and email details of the Ombudsman from your service provider (bank/FI) or can access the RBI website to obtain the details.

It’s mandatory for the complainant to submit proper records and documentary proofs so that claim for compensation is entertained by the ombudsman. The ombudsman will give a hearing to the complainant as well as the service provider in question. If resolution through settlement, conciliation and mediation fails, the ombudsman will pass an award, which  can be a compensation up to Rs 20 lakh. Besides, the Ombudsman can also award a compensation of Rs 1 lakh in lieu of loss of customer’s time, expenses incurred and mental agony.