Mumbai: A slew of companies harbouring fintech ambitions have made a beeline to the
Reserve Bank of India to become licensed Payment Aggregators (PAs) under the central bank’s upcoming regulatory regime for non-bank payment providers.
Firms that have applied for authorisation or in advanced stages of submitting their proposals to the RBI include the Tata group, Amazon, Reliance Industries, Dutch payments startup Adyen, Paytm, BharatPe, PhonePe, CC Avenue, Razorpay, Cred, Zomato, PayU, Worldline, Pine Labs and CAMSPAY, sources involved in the diligence process told ET.
At least 30 firms are learnt to have submitted their proposals, sources said, indicating that the number of applicants could increase before the September 30 deadline for existing and new non-bank firms to apply.
The firms that will be authorised to operate as PAs in India will be under the direct purview of RBI in rendering payment services to merchants, in a step that many industry insiders said would lead towards a more standardised and regulated payments ecosystem.
“For long, the operations of PAs in India have been seen as a blind spot for regulations,” said a payments industry insider. “RBI’s PA/PG rules in this regard were introduced to ensure a standard for those firms offering payment service to merchants.”
“There is a feeling that any internet firm with a mass consumer base will be applying for a PA licence as the eligibility barrier is low and missing out on approval can limit any future expansion in offering fintech services,” the source said.
Under the new rules, any firm acquiring merchants would compulsorily need RBI approval to operate as a licensed PA, the source added.
The central bank’s new Payment Aggregator/Payment Gateway guidelines – introduced formally in March 2020 – mandate that only firms approved by RBI can acquire and offer payment services to merchants. Regulated banks do not need any separate approvals.
As per RBI rules, the eligibility criteria for a firm applying for PA authorisation is a minimum net worth of Rs 15 crore in the first year of application and going up to Rs 25 crore by the second year.
The firm also must fulfil ‘fit and proper’ criteria as well as be compliant with global payment security standards under PCI DSS, an information security protocol maintained by payment firms across the world.
“PhonePe has been operating as a Payment Aggregator, offering payment services to merchants on our network. In line with the RBI guidelines, we would be applying for the PA licence to continue offering payment services to our merchant partners,” a PhonePe spokesperson said.
According to Ramesh Narasimhan, Head – Digital Commerce, Worldline India, “Ingenico ePayments India – a Worldline brand, is in the process of directly applying for the Payment Aggregator license well before the deadline as we remain committed to deepening the reach of online payment solutions in India.”
Spokespersons for Adyen, Razorpay and Cred did not offer comment. Other firms cited earlier in the story did not respond to ET’s email. RBI also did not comment.
Newly listed Zomato said in exchange disclosure that it had already incorporated a wholly owned subsidiary to handle digital payments and payment gateway services.
Sources told ET that many leading e-commerce marketplaces, global payment firms, existing PGs and domestic consumer internet firms are also in line to apply for authorisations.
ET could not independently confirm these names.
“There is almost a sense that RBI is inundated with the rush of applications,” a second source aware of the matter said. “The indication has been that RBI will take a ‘First In, First Out’ approach in scrutinising different proposals. This means that the overall scrutiny process is likely to take a few months.”
“The regulator will also allow firms to continue their operations until they communicate the fate of the respective proposals. For a PA operating in India whose application has been turned down, the expectation is that RBI will offer a window to wind down its operations,” the source, who is the chief executive of one of the firms applying for authorisation, told ET.
RBI defines PAs as entities that facilitate e-commerce sites and merchants to accept various payment instruments from the customers for completion of their payment obligations, without the need for merchants to create a separate payment integration system of their own.
PGs are defined as entities that provide technology infrastructure to route and facilitate processing of an online payment transaction without any involvement in handling of funds.
The motive of the new PA/PG guidelines could also be to have a better supervisory control over payment operations of internet and e-commerce firms in India.
The applicability for PA/PG authorisation could be made ‘on-tap’ after the initial set of approvals, a third source said.