Instamojo on Wednesday said that the aggregator/ payouts function will be undertaken in partnership with other licensed payment aggregators. The move comes after the Reserve Bank of India turned down its application for a license to operate as a payment aggregator.
The RBI rejected Instamojo’s license saying the company failed to meet the eligibility criteria, according to The Morning Context, which first reported the development. The official RBI website also shows the central bank returned its application in September this year.
“… The aggregator/ payouts function will now be undertaken in partnership with other licensed PAs while our payment gateway continues to be fully functional. We also have the window open to reapply for the PA license in the next financial year. In compliance with this notification, we settled all the funds in our nodal accounts into our merchant accounts to mitigate any challenges with respect to payouts and refunds,” Gehani said in a statement.
“In the meantime, in order to protect the business interests of our 2 million plus customers, we immediately began transitioning their payment accounts to our licensed PA partners. This transition required a fresh KYC, and 90% of our customers have accomplished the process, and their accounts have been successfully transitioned. Some merchants faced temporary delays in settling payments while the KYC was being processed, and now they are back in the business-as-usual mode. Transitioning the remaining merchants is our top priority and we are confident of accomplishing this as soon as we handhold our merchants to refresh their KYCs with our licensed PA partners,” he added.
Founded in 2012 by Sampad Swain, Aditya Sengupta, and Gehani, the D2C-focused Instamojo offers services like ecommerce website builder, one-page website landing page, and payment links. The startup is backed by several marquee investors such as Kalaari Capital and Mastercard. To date, the firm has raised $15.2 million in funding.
The central bank in February this year granted in-principle approval to as many as 32 entities to operate as an online payment aggregator (PA). A payment aggregator license enables firms to process large numbers of payments in terms of being involved in settling payments.
Since then more firms have lined up to get the license from the central bank, which has been trying to bring the online payment aggregation business in the country within the regulatory fold.
It goes without saying that the shutting down of the payment business will have a big impact on the company’s financials as well.
Gehani in the statement highlighted that the company pivoted in 2020 to become a full-stack commerce enabling platform for D2C businesses.
“This transition has helped Instamojo achieve EBITDA profitability. In Q2 FY24, we clocked our highest ever EBITDA margin of 15% vs -7% EBITDA margin in Q2 FY23. Broadly, Instamojo will remain profitable in FY24 which will be our first full-year of profitability,” he said.