The Reserve Bank of India will soon treat all payment aggregators as regulated entities under the Payment and Settlement Systems Act (2007) under its direct supervision, bringing in tighter regulations for the country’s digital payment industry.
The new set of guidelines for these companies include having minimum net worth of ₹15 crore by June 2020, along with more stringent governance, operational and fit and proper norms.
The central bank has also demanded mandatory compliance on technology and cyber-security requirements at par with standards for regulated financial institutions for those wishing to continue their businesses.
Companies with ongoing operations have been given time till June 2020 to become fully compliant and apply for fresh licenses. The guidelines are set to kick in starting from April 2020.
Industry players ET spoke with raised concerns that the cost of compliance could dent businesses of several existing aggregators. Most are fintech startups and already operating on thin margins following government’s decision to recoup the transaction fee for processing digital payments or MDR, earlier this year.
“These are not light-touch regulations that’ll allow for fostering of innovation,” said an industry executive on condition of anonymity, “These regulations will increase the cost for businesses already running on wafer thin margins.”
A payment aggregator is an intermediary service provider that allows merchants to process mobile or e-commerce payments made by customers digitally. In India, these entities mostly include fintech startups such as PayU, Instamojo, Paytm, Razorpay and BillDesk among several others.
Prior to these guidelines these companies were not directed by any framework on governance and capital requirement.
“There are 65-70 payment aggregators operating currently in the country. While the bigger players that have experience and equity capital to meet the cost of compliance will survive, most players will be forced to shut shop due to these increased costs,” said another industry insider, while also questioning the timing of the guidelines.
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