The central bank on Thursday said it is examining the possibility of bringing payment gateway operators under its direct regulatory ambit, a move that industry players said will make the digital payments ecosystem more secure and stable.
“We are considering the feasibility of directly regulating these payment operators…given their growing importance in the payment systems of the country, we deem such a step to be important,” Reserve Bank of India governor Shaktikanta Das said during his monetary policy speech. The RBI said it will soon publish a draft of the regulatory guidelines for stakeholder consultations.
Mint Road and New Delhi have been in talks for some time now to come up with a comprehensive regulatory solution for the burgeoning payment systems in the country, which is riding the growth of ecommerce and m-commerce transactions.
Meanwhile, issues ranging from the fees that businesses pay for accepting digital payments to grievance redressal for failed transactions and even distinction of the types of payment gateway entities have emerged as major points of contention among the payment firms, banks and their customers. The payments industry expects the RBI to address these issues in the consultation paper.
“The digital payments space has attracted a large number of players over the last few years, hence it is necessary to evolve some sort of a regulatory mechanism to ensure serious players with sound finances remain here,” said Anand Ramachandran, CFO at Ingenico ePayments India, one of the oldest payment gateway companies.
The space has evolved so much that it needs regulatory attention urgently, said Harshil Mathur, CEO of payment startup Razorpay. “There is only self-regulation of sorts in our industry since we mostly have to abide by rules set by our partner banks which also differ widely. Common RBI guidelines will help bring standardisation to the space.”
Industry sources pointed out that since the RBI encouraged the companies to bring in innovations in the retail payments space, multiple players have emerged. While this has helped connect a large number of small merchants who would otherwise not be serviced by big players, it has also caused a threat to the ecosystem.
Many so-called payment companies are just bringing in a technology layer over the gateway entity and not making settlements directly through a nodal bank account. In case of a failure in transaction, the merchant could be at risk of losing money, said industry executives.
“Grievance redressal mechanism is of paramount importance in the payment gateway space,” said a top executive at one of the largest payment gateway entities in India.
The security aspect around digital payments is also something that needs to be addressed, said Suresh Rajagopalan, president, software products business at FSS, which provides payment solutions to banks and others.
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