RBI Asks Simpl To Stop Payment Ops For Lack Of Licence

The Reserve Bank of India (RBI) has asked Bengaluru-based fintech startup Simpl to immediately stop all payment operations. The company confirmed the development to Inc42 and said it was working on its next move. 

In a September 25 letter, the regulator said that the company was running a payments system involving “payment, clearing, and settlement” without holding the required Certificate of Authorisation under the Payment and Settlement Systems (PSS) Act, 2007, the Economic Times reported.

“We received a notice saying that our business falls under the category of a payment system and therefore we cannot operate without a licence. The directive was to stop operations immediately since we don’t have one. The notice came only about an hour ago, so we haven’t had the chance to reach out to them yet,” Simpl founder and CEO Nitya Sharma told Inc42. 

The RBI diktat came after the Enforcement Directorate (ED) filed a complaint in July against the BNPL platform and Sharma for allegedly violating the foreign direct investment (FDI) norms. ED had accused the startup of contravention to the tune of INR 913.75 Cr under the Foreign Exchange Management Act (FEMA), 1999. 

Sharma, however, said that the RBI action was not linked to the ED accusation. At the time, Simpl had claimed to be operating in the field of IT and technology services to raise money.

“As for next steps, our immediate plan is to get on calls, understand the situation better, and wait for clarification from the RBI tomorrow,” Sharma said. 

A Look Into The Business Model

Set up in 2015, Simpl powers checkouts for major online platforms like Zomato, BigBasket and Rapido. The company claims to work with more than 26,000 merchants, allowing users to make instant payments and settle their bills within 15 days without interest. 

With more than 7 Mn users, it has raised more than $83 Mn from investors like Green Visor Capital, DIA Investments, Hard Yaka, FJ Labs, and Honeycomb Investments. The largest funding came in October 2021, when it raised about $40 Mn in a round led by IA Ventures and Valar Ventures.

The RBI move comes at a time of increased scrutiny of payment startups. Earlier this month, the central bank had issued master directions for payment aggregators, widening its direct supervision to cover all categories of players, including online, offline, and cross-border entities.

According to industry experts, BNPL startups in India either run on their own NBFC licences or operate only as Lending Service Providers (LSP) for banks and NBFCs. That’s where the Simpl model has come under the RBI glare. 

Simpl’s business was built around making online payments seamless. Instead of positioning as a traditional lender, Simpl operates as a checkout utility, allowing users to complete purchases instantly, without feeding in card details or UPI codes every time.

Simpl offers a short credit window of up to 15 days, after which the customer has to repay the money. It devised a business model akin to the good-old Khata system.

Instead of earning from customers, the startup charges merchants the way card networks charge merchant discounts. It also gains access to valuable data on consumer spending patterns and repayment behaviour.