“We are currently not accepting new applications. Our Sales team will get in touch with you shortly,” a message on PayU’s merchant onboarding page says
The RBI cited PayU’s complex corporate structure as one of the reasons for asking it to reapply for the payment aggregator licence
Earlier this week, fintech unicorn BharatPe and startup EnKash received in-principle approvals from the RBI for the PA licence.
The Reserve Bank of India (RBI) has asked B2B payment service provider PayU to reapply for its payment aggregator (PA) licence.
For the time being, the fintech unicorn has stopped onboarding new merchants. PayU’s merchant onboarding page displays a disclaimer, “We are currently not accepting new applications. Our sales team will get in touch with you shortly.”
The fintech unicorn’s complex corporate structure was one of the reasons for the RBI asking it to reapply, ET reported citing sources.
PayU now has four months to rework and reapply with the RBI for the PA licence. “We will work with them over the next 120 days to address some aspects and resubmit our application. One of the key aspects is simplifying our corporate structure. We are already progressing quite well with some suggested solutions,” a PayU spokesperson was quoted as saying on the matter.
The spokesperson added that the development would have no impact on PayU’s existing users.
This is the second application from an Indian payments startup that the federal bank has rejected in recent months. In November 2022, the RBI rejected Paytm’s application for a PA licence, directing it to get necessary approvals for past downward investment into its wholly-owned payments subsidiary Paytm Payments Services Limited (PPSL) to comply with FDI guidelines.
The listed fintech unicorn also stopped onboarding new merchants and has till March 26, 2023, to resolve the issues and reapply.
The entities that apply for a PA licence are subject to a system audit, including a cybersecurity audit. In addition, companies that have received the RBI nod for a PA licence must shift from using nodal accounts to escrow accounts.
This audit is the reason behind some entities not receiving the licence. The RBI has guided the said entities by apprising them of the steps they need to take to get the licence and giving them time to resolve the issues.
Of late, many competing fintech startups have received an in-principle nod from the central bank for the payment aggregator licence. Earlier this week, fintech unicorn BharatPe and startup EnKash received in-principle approvals from the RBI for the PA licence.
Similarly, the likes of IPO-bound PayMate, neobanking unicorn Open, SabPaisa, Infibeam Avenues, Innoviti, Pine Labs, Cashfree Payments, Stripe and Razorpay have received approvals from the RBI to operate as payment aggregators.
However, Razorpay, Stripe, and Cashfree Payments had to stop onboarding new customers in December 2022, as per an RBI order.
The fintechs were asked to provide additional details to the central bank for the final licence process. “As part of this process, the RBI has suggested we temporarily withhold onboarding new online merchants till such details are submitted,” a Razorpay spokesperson said then.
However, a Stripe spokesperson denied receiving any communication from the RBI to pause onboarding new customers.
