The new set of guidelines for these companies include having minimum net worth of Rs15 crore by June 2020, along with more stringent governance, operational, and fit and proper norms for board of directors.
The central bank has also demanded mandatory compliance on technology and cyber-security requirements at par with standards for regulated financial institutions for those wishing to continue their businesses.
Companies with ongoing operations have been given time till June 2021 to become fully compliant and apply for fresh licenses. The guidelines are set to kick in starting from April 2020.
Industry players ET spoke with raised concerns that the cost of compliance could dent businesses of several existing aggregators. Most are fintech startups and already operating on thin margins following government’s decision to recoup the transaction fee for processing digital payments or MDR, earlier this year.
“These are not light-touch regulations that’ll allow for fostering of innovation,” said an industry executive on condition of anonymity, “These regulations will increase the cost for businesses already running on wafer thin margins.”
A payment aggregator is an intermediary service provider that allows merchants to process mobile or e-commerce payments made by customers digitally. In India, these entities mostly include fintech startups such as PayU, Instamojo, Paytm, Razorpay and BillDesk among several others.
Prior to these guidelines these companies were not directed by any framework on governance and capital requirement.
“There are 65-70 payment aggregators operating currently in the country. While the bigger players that have experience and equity capital to meet the cost of compliance will survive, most players will be forced to shut shop due to these increased costs,” said another industry insider, while also questioning the timing of the guidelines.
“Several aspects of the guidelines auger well with the interest of customer protection, but this could have been avoided at least at a time when most businesses are under stress due to outbreak of Covid-19,” the executive cited above, said.
Under the new guidelines, payment aggregators will also be responsible to check payment security and data infrastructure of merchants on-boarded on to their platforms along with mandatory AML and KYC checks.
A spokesperson from the Payment Council of India, the industry body for digital payments, told ET that while the move was a welcome one, it’ll seek clarity about several provisions of the guidelines that could create hurdles for businesses.
“Merchants already have their KYC authentication done while opening new bank accounts. Mandatory KYC just for onboarding purposes can be avoided,” said Vishwas Patel, chairman of Payment Council of India. “We will ask RBI if a provision can be made to merge the two processes.”
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