Payment Gateways (PGs)and Payment Aggregators (PAs) are intermediaries playing an important role in facilitating payments in the online space.
The Central bank formally introduced new guidelines for regulation of PGs and PAs. The guidelines specify that all payment aggregators need to be authorised by the Reserve Bank of India (RBI) and need an operating license.
The Reserve Bank of India, vide its circular in March’ 2020, had issued the guidelines on Regulation of Payment Aggregators and Payment Gateways. The deadline to apply for authorisation for the non-bank entities was extended till Sep 30th, 2021
Earlier, RBI had in Sep 2019 released a discussion paper on the aforesaid guidelines. Based on the feedback received and considering the important functions of these intermediaries in the online payments space, as also keeping in view their role vis-à-vis handling funds, RBI has decided to
- Regulate in entirety the activities of PA
- Provide baseline technology related recommendations to PGs
PAs are entities that facilitate e-commerce sites and merchants to accept various payment instruments from the customers for completion of their payment obligations without the need for merchants to create a separate payment integration of their own. In the process they receive payments from customers, pool and transfer them to merchants after a time period.
PGs are entities that provide technology infrastructure to route and facilitate processing of an online payment transaction without any involvement in handling of funds
Key Aspects of the Guidelines
- Non-Bank PAs will be required to have a minimum net worth of ₹ 15 Crs to be increased to ₹ 25 Crs by the end of third financial year
- E commerce marketplaces with PA business would need to segregate PA business into a separate entity
- Board Approved policy for Merchant Onboarding
- Safeguards against Money Laundering (KYC/AML/CFT) provisions
- Settlement and Escrow Account Management
- Customer Grievance Redressal and Dispute Management Framework
- Baseline Technology Related Guidelines
Why the need to Regulate and what’s the Impact?
With the Indian online payments market anticipated to reach $1 trillion by 2023 (Credit Suisse AG Report) , I believe it is no surprise that the RBI has opted to act and chosen full and direct regulatory supervision of payment intermediaries
With the RBI’s continuous focus on improving consumer safety and confidence, it has seen the necessity for clearly defined roles for all intermediaries as well as the implementation of a uniform grievance redressal procedure.
As a result of these rules, standardization, accountability, and transparency will be introduced into the operation of online payment intermediaries.
Author Profile: Gautam Shankar
Conventional banker-turned-payment industry leader, Gautam’s vision to stay abreast & continuous improvement, led him to explore the world of fintechs. A little over 8 years in the said industry & with over 20 years of experience, “It’s never too late to be what you might have been”, he believes. Gautam spearheads Happay’s growth in India as their VP, Growth, Banking. He is accredited with building teams from ground up, nurturing partnerships & for being a change enthusiast. A Kopite, (die-hard Liverpool fan!), he dabbles in reading, traveling & spending time with his family. https://www.linkedin.com/in/gtmwithgautam/
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