RBI nod for select payment aggregator licenses

The Reserve Bank of India has approved some applications for payment aggregator licenses for firms like PayU, Razorpay and Billdesk, Entrackr has learnt from industry sources. However, the central bank is likely to reject or return applications from other large firms, like Swiggy, Zomato and Zaakpay (which runs MobiKwik’s payment aggregator).

A payment aggregator license allows firms to process large numbers of payments in terms of being involved in settling payments. A lot of firms have already been offering payment aggregation, but the RBI in 2020 flexed its supervisory powers and told firms in the business to apply for a license.

Not all firms have been successful in their bid for a license, potentially putting their entire business — and potentially millions of dollars in investments — at risk. Over 100 applications were rejected or returned, an industry source said.

The RBI was strict about a Rs 15 crore net worth requirement; outright rejected firms engaged in cryptocurrency trading, betting and gambling; and asked food delivery operators for clarity on why they needed payment aggregator licenses.

The central bank seems to only be entertaining firms that have payments as a core part of their business in the current phase of the licensing process. In other words, their public posture and actions, over that they might have communicated to investors as a long term gambit.

Moneycontrol reported some of the approvals and Mint reported on some of the rejections. The RBI has not yet officially put out a list of approved firms on its website; we will update this story when they do.

While payments firms that have been rejected for not fulfilling requirements have cause to worry, there is also now a real possibility that platforms with an in-app payment experience — like Swiggy and Google — may have to outsource this whole process to a licensed entity.

This isn’t the first time the RBI has brought in payment regulations that have industry-wide consequences. Over the years, the regulator has required additional verification of online card payments (which most countries do not require); set limits on auto-renewing payments, requiring merchants around the world to comply with a dashboard system for recurring charges to be able to serve Indian customers; and banned banks from issuing Mastercard cards for around a year for failing to localize its Indian users’ data within servers located in the country, which was yet another unusual demand that had widespread ramifications.

In taking these actions, the regulator has simply followed the rules, underlining how the financial sector will not allow the same level of laissez-faire that some startups have enjoyed in other sectors.