The Reserve Bank of India (RBI) on April 16, 2024, issued two draft directions on regulation of Payment Aggregators. With the introduction of new draft regulations, the RBI is apparently getting strict with payment aggregators (physical Point of Sale).
As per the draft rules, point-of-sale payment service providers (PA-P) must apply for authorization from the RBI by May 31, 2025. In case they fail to get authorization, they will have to cease these services.
Non-bank entities providing PA-P services have been asked to inform RBI within 60 days from the issuance of the April 16 circular about their intention to seek authorization. Banks are instructed to shut down non-bank payment service providers by October 31, 2025, unless they show proof of applying to the central bank for authorization.
Also Read: RBI Mandates Banks To Provide Key Facts Statement (KFS)
On the net worth criterion, the draft states, “Non-banks providing PA-P services as on the date of this circular, shall have a minimum net worth of Rs 15 crore at the time of submitting an application to the RBI for authorisation and a minimum net worth of Rs 25 crore by March 31, 2028.”
The Payment Aggregators PA – physical Point of Sale (PA – P) which fail to apply for authorization and are unable to maintain a net worth of Rs 15 crore at the time of applying will have to wind up their business by July 31, 2025. Meanwhile, entities providing services should have a minimum net worth of Rs 25 crore by March 2028, according to draft norms.
The positive news for users of debit and credit cards is that the payment aggregators will not be able to store card-on-file (COF) data from August 1, 2024. The draft further states that any such previously stored data will be purged. For transaction tracking and/or reconciliation purposes, entities can store limited data – the last four digits of the card number and the card issuer’s name
The draft said, “For face-to-face/proximity payment transactions done using cards, from August 1, 2025, no entity in the card transaction / payment chain, other than the card issuers and / or card networks, shall store the CoF data. Any such data stored previously shall be purged. For transaction tracking and / or reconciliation purposes, entities can store limited data – last four digits of card number and card issuer’s name – in compliance with the applicable standards.”
However, it is worth mentioning that these regulations are not in the final stage, as they would be implemented only after receiving comments from the stakeholders.
Also Read: What is Account Aggregator Framework and How it Works?
What are Payment Aggregators (PA)?
The RBI defines payment aggregators as entities that on-board merchants and facilitate aggregation of payments made by customers to such merchants, for the purchase of goods and services, using one or more payment channels, in online or physical Point of Sale payment modes through a merchant’s interface (physical or virtual), and subsequently settle the collected funds to such merchants.
- Online PAs (PA – O): PAs that facilitate e-commerce transactions in non-Delivery versus Payment mode.
- PA – physical Point-of-Sale (PA – P): PAs which facilitate face-to-face / proximity payment for Delivery vs Payment transactions.
According to experts, the RBI’s new draft regulations for payment aggregators (PA) if implemented in its entirety could impact the business models of fintechs and Point of Sale (PoS) operators.
Also Read: RBI Proposes Cash Deposit Facility Through UPI At ATMs
KYC and governance
As digital transactions have grown rapidly in recent years, the RBI has updated directions on certain aspects including know-your-customer (KYC), due diligence of merchants, operations in escrow accounts, and more.
“Cash-on-delivery transactions are outside the scope of the RBI circulars on PAs. Accordingly, such transactions shall not be routed through the escrow accounts,” said the draft.
