The nod will enable Razorpay and Cashfree to restart the process of onboarding new merchants and drive growth
The approvals come as a major respite for the two players as the RBI had barred both Razorpay and Cashfree Payments from onboarding new merchants late last year
For Open, the PA licence will enable it to further scale up its SME-led offerings and expand its products to a wider audience
Inc42 Daily Brief
Stay Ahead With Daily News & Analysis on India’s Tech & Startup Economy
Fintech startups Razorpay and Cashfree Payments, and neobank Open have received final approval from the Reserve Bank of India (RBI) to operate as payment aggregators.
“…. Razorpay has received the final authorisation from the Reserve Bank of India (RBI) to operate as a Payment Aggregator (PA) under the Payment Settlements Act, 2007… We welcome this new development and are delighted to be one of the first Payment Gateways to have received the final PA license from RBI,” said Razorpay in a statement.
The Harshil Mathur-led company also said that it has restarted onboarding new customers after receiving the said nod.
Meanwhile, Cashfree said that the approval will enable it to drive exponential growth and add new clients to its kitty.
“Securing the Payment Aggregator (PA) license from the RBI is a pivotal moment for Cashfree Payments, affirming our focus on compliance and highlighting the significance of a well-regulated payments landscape… We are now onboarding new merchants on our payment gateway…,” said a Cashfree spokesperson.
For neobank Open, the final approval has come more than a year after it received in-principle approval from the RBI for the PA licence. As per the company, it was working closely with the central bank since then to complete the necessary requirements, such as System Audit Report and CA certificate, for the licence.
“We are elated to receive the Payment Aggregator/Payment Gateway licence from the RBI…. The enhanced capabilities will bolster our financial automation platforms, providing SMEs with advanced tools to streamline their financial operations and thrive in the digital era. We are grateful to the RBI for their evaluation and recognition of our contribution,” said Open’s cofounder and chief executive officer (CEO) Anish Achuthan.
The approval was granted to the companies under the provisions of Payments Settlements Act, 2007. For the uninitiated, the payments aggregator licence was introduced by the central bank in 2020 to bring all payment aggregators as regulated entities under the Act and to streamline the operations of the entire segment.
The development comes as a major respite for Razorpay and Cashfree Payments as the Reserve Bank of India (RBI) had barred them from onboarding new merchants late last year. This came right after the Enforcement Directorate (ED) raided the premises of multiple online PAs as part of its crackdown on illegal Chinese lending apps.
The central bank was also said to have tightened its screening process to ensure that only the ‘right companies’ get the final approval for the payment aggregator licence.
As a result, the merchant onboarding process was frozen and subsequently revenues flatlined even as competitors with licences began to race ahead. While Cashfree and Razorpay reportedly built alternative revenue streams, the core business continued to stagnate.
But, with the new licences in place, all decks have been cleared for the two fintech startups to onboard new merchants and scale up revenues even as competition continues to mount from competing PAs such as PhonePe, Juspay and PayU.
As per latest RBI data, as many as 45 applicants have been granted in-principle authorisation to operate as a payment aggregator including the likes of Zomato, Infibeam Avenues, EaseMyTrip, among others. On the other hand, 71 applications have been returned by the central bank.
Note: We at Inc42 take our ethics very seriously. More information about it can be found here.