Indian cab aggregators like Meru, TaxiForSure, Olacabs etc have taken on Uber’s payment collection mechanism. Uber which uses 1-step payment process to maintain consistent user experience (in line with experience across the world) is circumventing RBI’s mandatory 2-step payment mechanism. Uber customers are automatically charged towards the end of their trip sans any authentication, while Indian cab operators have to follow the 2-step mechanism.

RBI Throws A Googly At Uber India

RBI in its latest circular has called out such services (like Uber India), “willful non-adherence and violation of extant instructions.”

“It has come to our notice that despite the above clarifications there are instances of card not present transactions being effected without the mandated additional authentication/validation even where the underlying transactions are essentially taking place between two residents in India (card issued in India being used for purchase of goods and service offered by a merchant/service provider in India).

It is also observed that these entities are evading the mandate of additional authentication/validation by following business / payment models which are resulting in foreign exchange outflow. Such camouflaging and flouting of extant instructions on card security, which has been made possible by merchant transactions (for underlying sale of goods / services within India) being acquired by banks located overseas resulting in an outflow of foreign exchange in the settlement of these transactions, is not acceptable as this is in violation of the directives issued under the Payment and Settlement Systems Act 2007 besides the requirements under the Foreign Exchange Management Act, 1999.”

RBI further adds (link):

“It is advised that entities adopting such practices leading to willful non-adherence and violation of extant instructions should immediately put a stop to such arrangements.

It is further advised that where cards issued by banks in India are used for making card not present payments towards purchase of goods and services provided within the country, the acquisition of such transactions has to be through a bank in India and the transaction should necessarily settle only in Indian currency, in adherence to extant instructions on security of card payments.”

Uber And India : In less than a year, Uber has expanded in to 10 cities in India – making it largest market for Uber outside US (by number of operational cities).

Welcome to Uber, India. Like KFC (which launched a vegetarian outlet in Gujarat), be ready to prepare for India ride.

With Uber being forced to Indian payment mechanism, we expect more wallet / micro-transactions like service being launched?