Decoding RBI’s Draft Guidelines for Payment Aggregators

The Reserve Bank of India (RBI) has recently unveiled draft guidelines for payment aggregators (PAs), and industry experts believe that these regulations are both pivotal and timely. Let’s delve into the details and understand why these guidelines are significant.

Boosting the PA Ecosystem and Enhancing Trust

The proposed regulations aim to bolster the PA ecosystem, improve digital trust, and promote ethical practices. Here are the key takeaways:

1. Level Playing Field: The guidelines ensure a level playing field by defining PAs as entities that onboard merchants and facilitate payment aggregation for goods and services. This includes both online and physical point-of-sale (PoS) payment modes. Notably, the updated definition now includes physical PoS payment providers within the ambit of payment aggregators.
2. Consumer Protection: By enhancing KYC norms for merchants, the RBI enables PAs to manage risks effectively. Small and medium-sized merchants receive specific KYC procedures, ensuring their protection.
3. Escrow Accounts: PAs are required to maintain funds collected in escrow accounts with scheduled commercial banks. These accounts serve both online and physical PoS activities.

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Key Provisions in the Draft Guidelines

Let’s explore the critical provisions outlined by the RBI:

1. Authorization for Non-Banks: Non-banks offering physical PoS services must notify the RBI of their intent to seek authorization within 60 days. They should then submit their application by May 31, 2025, for approval to continue operations.
2. Net Worth Requirements: PAs facilitating face-to-face or proximity payment transactions must have a minimum net worth of ₹15 crore while applying for authorization. By March 2028, this minimum net worth should increase to ₹25 crore.
3. Merchant Onboarding: The guidelines emphasize due diligence of merchants, ensuring ethical practices and trust-building.
4. Closing Non-Bank PA-P Accounts: Banks are directed to close accounts used for non-bank PA-P activities by October 31, 2025, unless the PAs provide evidence of their authorization application.

Impact on Fintechs and PoS Operators

Experts suggest that the comprehensive regulations could impact the business models of fintechs and PoS operators. Companies like Innoviti Payments, Pine Labs, and MSwipe, which facilitate physical PoS transactions, will now operate under regulatory cover¹.

In conclusion, the RBI’s proposed regulations for payment aggregators are a significant step toward fostering transparency, consumer protection, and a robust PA ecosystem. As these guidelines take effect in the coming months, the industry awaits their implementation with anticipation¹.