TRAI’s SMS Regulations And The Lesser Known Impact on Ecommerce Industry

[Guest article by Valerie Rozycki, a Standford Graduate living her entrepreneurial dream in India as the Co-founder of ZipDial.]

In December of last year, the Telecom Regulatory Authority of India (TRAI) announced new policies that protect consumers from SPAM marketing SMS and calls. March 1st was the deadline (extended now) for implementation and the date when these regulations and their punitive implications on marketers will take effect.

While these regulations are well discussed, ecommerce and others web businesses have not yet fully realized the impact of these regulations. There are important implications being overlooked by many web businesses who are at risk of fines and interruptions to their services if they do not take action. These poorly understood implications are explained in this article.

The new policy differentiates SMS between two categories, namely transactional and promotional. Promotional SMS are highly restricted, while transactional SMS are allowed for particular use cases. Financial institutions, railways, airlines or educational institutions may use transactional SMS with their registered users for delivery of certain services such as information updates (e.g. bank balance, PNR status).

However, related services are restricted and risk interruption and fines. For example, an SMS from an airline is considered transactional but from an online travel agent is considered promotional and is therefore restricted, even if it both messages carry a flight PNR. All promotional SMS (e.g. PNR status from online travel portal, even if the consumer explicitly requests it) are banned between the hours after 9pm and before 9am.

There are several use cases where web businesses rely on sending SMS to customers for verification of the customer’s mobile phone which will now under the new regulations be considered promotional and be restricted, including:

  • Customer registration
  • Purchases or transactions
  • Change in password or account details

Typically the customer mobile number is verified by a system generated SMS to the customer’s mobile with a unique code. That unique code is then entered into the web page for verification that the customer on the site is in fact the owner of the mobile phone. Some businesses also solve this with an outbound call to the customer’s mobile phone.

There are cases where a customer tries to register someone else’s mobile number, by mistake or in a malicious attempt, and the SMS or call goes to an unknown third person who would consider this as SPAM. In such a case if the customer who received the potential SPAM complains against the web business, then the business is liable for a penalty of Rs. 25,000. Every subsequent penalty increases up to Rs. 2.5 lakhs eventually resulting in a two year ban.

While TRAI may revise these regulations over time, there will inevitably be a period starting April 1st when businesses are negatively affected, risking fines and interruptions in service. These web businesses should both approach TRAI collectively and propose a suitable middle ground as well as look for alternate solutions urgently.

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