2 min readMumbaiUpdated: Feb 15, 2024 05:04 AM IST
Close on the heels of regulatory action against Paytm, the Reserve Bank of India (RBI) has asked card networks Visa and Mastercard to bar card-based commercial payments through payment service providers and companies.
While the RBI has not officially announced the reasons for the directive, fintech companies active in the segment said such transactions are being done at outlets which are not authorised to accept such payments. Many fintech firms are reportedly allowing customers to use their cards to pay for tuition fees and rentals even though these fintechs are not authorised to accept payments through cards. This may be a violation of the Payment and Settlement Systems Act, 2007, banking sources said.
“We have been directed by the regulator to ensure that all Business Payment Service Provider (BPSP) transactions be kept in abeyance till further notice. Hence, we kindly ask that all BPSP merchants registered by yourselves with Visa be immediately suspended till advised by us to the contrary,” Visa said in a communication to fintechs. “For avoidance of doubt, any transaction authorized prior to the communication would be settled in the ordinary course of business. We kindly ask that you send us a confirmation at the earliest that such merchants/merchant IDs have been blocked and transactions ceased. Failure to adhere to these instructions could result in regulatory sanction and non- compliance assessment under the Visa rules,” Visa said.
According to fintech players, the RBI wants to ensure that fintech players and service providers are within the regulatory ambit and that no fraudulent or unauthorized transactions are occurring on the digital platform. “There could be KYC issues at a time when the central bank wants to ensure that all digital transactions are fully KYC compliant,” said an official.
On January 31, the RBI barred Paytm from offering all its core services —including accounts and wallets — from March, effectively crippling the company’s business citing many KYC and other issues.
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