The Reserve Bank of India (RBI) announced that it had given 32 current payment aggregators preliminary approval to work as online payment aggregators. In the past, the RBI published circulars relating to the regulations for payment aggregators and payment gateways on March 17, 2020, and March 31, 2021. Among others, in-principle authorization has been given to Amazon (Pay) India Pvt Ltd, Google India Digital Services Pvt Ltd, Infibeam Avenues Ltd, and Zomato Payments Pvt Ltd. According to the RBI, applications are being processed for 18 additional payment aggregators.
Online non-bank payment aggregators (PAs) were needed by the recommendations to apply to RBI by September 30, 2021, to reputation under the Payment and Settlement Systems Act of 2007. (PSS Act). All such PAs were still given another time to submit their applications by September 30, 2022. The terms payment gateway and aggregator are used interchangeably and have different meanings. The payment aggregator model is actinically to handle online payments. A payment gateway by itself is not sufficient to handle payments, according to another widespread misconception. An online payment gateway just manages the transaction’s technical aspects.
In-Principle Authorization By RBI To Payment Aggregators
Typically, to establish merchant accounts, payment gateways collaborate with the bank(s) that operate behind the scenes. The underwriting procedure and fund transfer process must be coordinated by the underlying bank, which is frequently difficult when there are so many merchants applying for these accounts to accept payments online.
The Payment and Settlement Systems Act of 2007’s Section 7 is where “authorization” is provided; the RBI stated that the issuance of “in-principle” authorization shall not be considered as authorization unless the organization is authorized.” The entity must submit a System Audit Report (SAR) to the RBI along with a certificate from a Chartered Accountant attesting to compliance with the net worth threshold ” according to the RBI.
The entities must also abide by other Guidelines rules and meet and extra requirements set forth by RBI, according to the central bank. New PAs cannot begin operations until they receive “authorization” under Section 7 of the Payment and Settlement Systems Act, 2007, the RBI said. Existing PAs that have submitted applications for authorization within the required time frames may continue operating unless otherwise instructed by the central bank.
The RBI further stated that all parties involved are urged to only conduct business with current PAs who have received in-principle authorization or whose applications are currently being reviewed.
Additionally, the RBI’s “authorization”2 under Section 7 of the PSS Act is required before stakeholders can conduct business with new PAs, according to the central bank. Establishing an internet business requires managing multiple aspects at once, including product supply, inventory management, logistics, and more. Online payment acceptance, however, is the issue that draws the most attention.
The majority of organizations least amount of payment failure and the most frictionless s customer experience possible when beginning to accept payments online. It’s likely that if you’re beginning an online business you’re looking for the best payment solution, which is why you may have run across terms like “Payment Gateway” or “Payment Aggregators.”
What Is A Payment Aggregator?
A service provider known as a payment aggregator combines different online payment solutions and offers them to retailers in one location. It enables many payment methods, such as cash/cheques, online payments made via a variety of payment sources, or offline touchpoints (in-store kiosks, remote link-based payments, or billing counters).
It enables business owners to accept bank transfers without opening a merchant account with a bank. It implies that a merchant is not required to have a merchant account with the bank. Payment aggregators are fundamentally responsible for integrating with a wide range of payment providers to offensive solutions for payment acceptance.
Non-bank payment aggregators in India are now required to acquire RBI authorization as per the Guidelines. By June 30, 2021, existing non-bank enterprises that provide services to payment aggregators would have to file a comparable application for permission; however, they might continue operations as usual until the RBI authorized them. Authorized Aggregator firms in India and their marketplace operation must be handled separately by e-commerce marketplaces if both activities are managed by the same organization.
Minimum Capital Necessary
Whether they are a new company or an established corporation, Payment Aggregators in India must have a minimum net value of INR 15 crore at the time of application. The net worth must then rise to 25 crores within the time frame specified in the criteria. Therefore, the net worth of 25 crores of Indian rupees must always be preserved.
According to the Guidelines, the Payment Aggregators are required to inform the RBI of any change in ownership or control as well as any details about how complaints will be handled, how unsuccessful transactions will be reimbursed, return policies, etc.
Anti-Money Laundering Systems to Prevent Money Laundering
The Prevention of Money Laundering Act of 2002 shall now apply to Payment Aggregators by the Guidelines. For the anti-money laundering system to be effective, Payment Aggregators must also abide by the KYC guidelines outlined in the “Master Direction – Know Your Customer (KYC)”.
Process for Boarding Merchants
Payment Aggregators are expected to carry out background and antecedent checks on the merchants to make sure that they are not trading in fake, illegal, or other goods or harboring any ill will against their clients.
System for Settlement and Escrow Accounts
Payment Aggregators are required to open a single escrow account with a designated commercial bank to store all of the funds they aggregate. The account may only be used by the Payment Aggregators for the debits and credits authorized by the Guidelines; cash-on-delivery transactions are not permitted. For Payment Aggregators to settle their accounts with merchants, the RBI has also set rigid deadlines.
Reports that Payment Aggregators are required to submit
The net worth certificate, which has been audited by a chartered accountant with a license, as well as the IS Audit Report and Cyber Security Audit Report, must be included in annual submissions to the RBI. The RBI must receive quarterly reports of bankers’ certificates for statements and auditors’ certificates for keeping balances in escrow and settlement accounts. A new board of directors or incidents of cyber security issues must be notified as they happen, and monthly statistics on the transactions processed are necessary.
Payment Aggregators have been handed general instructions.
1. Merchant discount rate rules must be adhered to as soon as they are set by the RBI, and details on transaction fees for MDR, convenience and handling fees, etc., must be made explicit upfront.
2. The issuing bank alone has the authority to restrict the transaction amount for a specific payment method; payment aggregators are not permitted to do so.
3. For card-not-present transactions, the option of using an ATM pin is not permitted.
4. Refunds must be made using the original method unless the consumer specifically consents otherwise.
The systems and aggregators of digital payments needed to be supervised and governed by a legal framework. When electronic payments were first getting started, they were governed under section 18 of the Payment and Settlement Systems Act of 2007 read with section 10(2). (the “PSS Act”). When creating new standards, payment aggregators adopt more straightforward regulatory techniques that are broadly implementable and considerably improve the safety net for end users. As a result of technology’s rapid growth and growing use, regulations must take new possibilities into account.
Edited by Prakriti Arora