RBI Goes For Equal Online & Offline Payment Aggregator Norms

The online payment aggregator guidelines will be extended to offline players as well, RBI governor Shaktikanta Das said today during the monetary policy speech.

He stated that presently the regulations do not cover offline payment aggregators (platforms that handle face-to-face transactions, especially point-of-sale (PoS) platforms). But considering that both online and offline payment aggregators undertake the same nature of activities, the current regulations will apply to offline players as well, Das stated.

Talking about bringing the norms to offline players, PCI chairman and Infibeam Avenues’ ED Vishwas Patel said, “As our economy turns more towards digitalisation, going ahead, the lines between customers using payment aggregators for online payments and customers using payment systems for physical, offline payments for in shop transactions, will blur, and in some cases, it has already blurred to a greater extent. I think it would be a good idea to have a single regulation/licensing for all players for the same.”

The payment aggregator framework was launched in 2020 and mandated only RBI-approved companies to offer payment services to merchants. The payment aggregators had to apply with the apex bank and were expected to show a net worth of INR 15 Cr on the date of their application (or as of FY21). The limit will be increased to INR 25 Cr by the end of FY23.

The fintech startups that receive RBI authorisation will come under the direct purview of the central bank. Accordingly, merchants working with unauthorised payment aggregators would have to delist the PAs within three months of application rejection.

RBI has been considering several parameters when it comes to giving approvals. It has previously rejected applications based on KYC-related issues, history with certain banned apps, and more. 

Several online payment aggregators have received their licences and prominent names include Razorpay, Innoviti, Pine Labs and more. The applications of Zaakpay and MobiKwik were rejected on grounds unknown.

While these businesses operate for digital payments, a report by Statista expects that India will have nearly 20 Mn PoS terminals by 2025 catering to offline card transactions.

As such, the regulatory framework may be similar to online payment aggregators, but detailed guidelines will be issued in the coming days, the RBI governor said during his speech. 

What Does This Mean For Offline Payment Aggregators?

As detailed guidelines are awaited, the offline payment aggregators may have to comply with certain changes. These offline payment aggregators may not be allowed to store customer card credentials within their databases or servers and may have to apply for payment aggregator licences (similar to online PAs).

“While we await the details, this decision means facilitating more secure, trustworthy, and accessible digital payment options to customers, amidst the upsurge in the use of debit cards, credit cards, and UPI payments,” Dewang Neralla – CEO, NTT DATA Payment Services India said. “The implementation of this decision will not only lead to convergence on standards of data collection and storage but also drive synergy in regulation, covering activities of PAs, who are integral to the digital payments ecosystem.”

These offline PAs will also have to adhere to card limit guidelines stated by banks and the refund-to-source framework. They are likely to also have to cater to the merchant discount rate guidelines and display convenience and handling fees on the PoS. On non-card-based transactions, OTPs would be the authentication factor, as opposed to the current norm of ATM PINs. The firms may have to appoint a nodal grievance officer for consumer disputes and complaints as well.

Update | September 29, 2022, 6:00 PM

Story updated with Vishwas Patel and Dewang Neralla’s comment.