News Excerpt
The Reserve Bank of India has reduced the capital requirements for payment aggregators to Rs 15 crore at the time of application for the license from Rs 100 crore it had proposed earlier.

•    RBI said that the payment aggregator (PAs) (entities that facilitate e-commerce sites and merchants to accept various payment instruments) should be a company incorporated in India under the Companies Act, 1956 / 2013.
•     It also said that non-bank entities offering payment aggregator services would have to apply for authorization on or before June 30, 2021.
•    While both payment aggregators (PAs) & Payment Gateways (PGs) are intermediaries playing an essential function in facilitating payments in the online space, the new guidelines differentiate them both. The current guidelines are, however, aimed at PAs.
•    The central bank said that applicants need to have Rs 15 crore of net worth, which needs to be increased to Rs 25 crore within three years of operations.
•    Payments Council of India (PCI) is the industry body of payment aggregators and acquirers.

Payment Aggregators (PAs)    Payment Gateways (PGs)
These are entities that facilitate e-commerce sites and merchants to accept various payment instruments from the customers for completion of their payment obligations without the need for merchants to create a separate payment integration system of their own.
PAs facilitate merchants to connect with acquirers. In the process, they receive payments from customers, pool, and transfer them on to the merchants after a while. Example: Paytm, PayU, Instamojo, etc.    These are entities that provide technology infrastructure to route and facilitate the processing of an online payment transaction without any involvement in the handling of funds. Examples: Billdesk, CCAvenue, Firstdata, Ingenico Payments, amongst others.

    This has been a major relief for the payments industry. Rs 100 crore for the business was too big and could force many smaller payment companies to move out of this aggregation business. Also, the time given is enough for players to prepare well and apply.
    Further, the regulator pointed out that pure-play payment gateway companies would be separated as an entity and would be identified as technology service providers for banks and non-banks.
    The guidelines have been aimed at PAs only. They receive payments on behalf of these companies and transfer the money to their accounts.
    PAs have also been asked to adhere to strict security guidelines, adhere to all KYC and AML (Anti Money Laundering) rules.
    PAs need to check that their merchant customers are not involved in selling of prohibited or fake items.
    The central bank has also asked PAs to set up designated nodal offices to deal with customer grievance. RBI has prohibited PAs from allowing online transactions to be done with ATM pin as the second factor of authentication.
    Entities like Billdesk, CCAvenue, Firstdata, Techprocess were the original players in this space. Then came the wave of startups who transformed the gateway business altogether. Players like Razorpay, Cashfree, Paytm Payment Gateway and others started offering payment services to ecommerce companies.

Given the large scale adoption of digital payments and emergence e-commerce along with so many players, the RBI expressed interest in regulating the space.

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