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Payment Aggregators Urge RBI To Ease KYC Verification Requirement For Merchants

Inc42 · 1y ago

Payment Aggregators Urge RBI To Ease KYC Verification Requirement For Merchants

Fintech startup Decentro and other industry players are expressing concerns over the Reserve Bank of India's (RBI) requirement of physical KYC verification for merchants. Decentro has requested the RBI to push back the requirement, with PhonePe, BharatPe, and Mobikwik expected to follow suit. Payment aggregators fear that the new guidelines will increase the time and cost of onboarding merchants, potentially leading smaller businesses to abandon their services. Some stakeholders suggest limiting physical KYC verification to high-risk merchants or adopting digital verification methods. The RBI has been tightening regulations in the fintech space in response to increased digital adoption.

Related News

RBI’s stricter KYC rules may slow merchant onboarding 90%: experts

Economic Times

Economic Times · 1y ago

RBI’s stricter KYC rules may slow merchant onboarding 90%: experts

The Reserve Bank of India (RBI) has proposed stricter Know Your Customer (KYC) rules for payment aggregators, which may significantly slow down the onboarding of online merchants. Existing players will need to engage in re-KYC exercises for existing merchants, while new merchants will need to go through a bank-grade KYC process. Industry insiders estimate that this could lead to a 90% drop in merchant onboarding and increase operational costs for payment companies. The proposed rules also suggest physical verification of merchants' outlets and the cessation of direct settlement of funds from merchant escrow accounts to vendors. Small sellers may find the onboarding process demanding and may revert to alternate payment methods. Overall, the proposed rules could have a significant impact on the digital payment ecosystem in India.

Take KYC seriously: RBI’s clear message to fintechs

Economic Times

Economic Times · 12m ago

Take KYC seriously: RBI’s clear message to fintechs

The Reserve Bank of India (RBI) is urging fintech startups to adhere strictly to customer verification guidelines during client onboarding. The RBI has emphasized that there will be no compromise on stringent know your customer (KYC) requirements. The central bank is pushing for video KYC as the primary method for digital customer onboarding, with other processes such as offline Aadhaar validation and centralised KYC serving as ancillary checks. Moreover, the RBI is maintaining a strong stance on KYC for payment aggregators. This approach will result in increased operational costs for fintech startups but will also help to streamline the industry.

On KYC compliance front, payment aggregators may be second to some

Economic Times

Economic Times · 1y ago

On KYC compliance front, payment aggregators may be second to some

Indian payment firms and aggregators are lagging behind banks when it comes to meeting know-your-customer (KYC) norms. While banks are conducting thorough KYC checks, including video KYC and documenting storefronts, non-banks are taking a lighter approach. Some believe that non-banks are treating KYC as a security checklist rather than a regulatory requirement. However, with a recent regulatory crackdown on Paytm Payments Bank, fintechs with payment aggregator licenses are starting to enforce stricter KYC measures. Compliance with KYC is crucial for payment aggregators to avoid reputational risks and comply with regulations.

GST sleuths tracking merchants skipping tax via digital payments

Economic Times

Economic Times · 10m ago

GST sleuths tracking merchants skipping tax via digital payments

The Directorate General of Goods and Service Tax Intelligence (DGGI) is partnering with startups, payment aggregators, and payment gateways to monitor online merchants for tax evasion. Small merchants often engage in selling products that attract lower GST despite enlisting as sellers of different products. The government and the Reserve Bank of India (RBI) are cracking down on such behavior. While payment aggregators conduct due diligence during onboarding, continuous monitoring is lacking. The RBI has drafted guidelines on ongoing monitoring of merchants by payment aggregators to ensure correct taxes are paid. Fraud detection platforms help in flagging suspicious activities and fake UPI IDs used for fraudulent transactions.

Juspay, Zoho, Decentro secure RBI nod for payment aggregator business

Economic Times

Economic Times · 1y ago

Juspay, Zoho, Decentro secure RBI nod for payment aggregator business

Fintech startups Juspay and Decentro have received licenses to operate as payment aggregators from the Reserve Bank of India (RBI). Joining the likes of Razorpay, Cashfree, and Zomato, Juspay and Decentro will now be able to offer financial services such as lending and KYC verification. This comes amidst the RBI's tightening control over the fintech industry, with more players expected to receive licenses in the coming months. Zoho, a Software as a Service (SaaS) startup, also obtained the payment aggregator license, becoming the first enterprise SaaS player to do so.

Razorpay, Cashfree secure RBI approval for payment aggregator business

Economic Times

Economic Times · 1y ago

Razorpay, Cashfree secure RBI approval for payment aggregator business

Digital payment startups Razorpay and Cashfree have received the final approval from the Reserve Bank of India (RBI) to operate as payment aggregators. This approval allows the companies to onboard new merchants on their payment gateways. The approval comes as a relief for the companies, which were unable to sign up new customers for over a year due to an embargo imposed by the RBI. The RBI conducted thorough checks before granting the final authorization.

Track fishy transactions, RBI tells payment firms

Economic Times

Economic Times · 1y ago

Track fishy transactions, RBI tells payment firms

The Reserve Bank of India has instructed regulated payment companies to monitor high-value and suspicious transactions during the general elections. The directive came in response to concerns raised by the Election Commission of India. The RBI wants payment companies to track high-value merchant payments and recurring person-to-person payments that could potentially be used to influence voters or fund poll candidates. This is the first time the regulator has specifically called out payment companies to monitor digital payment movement during elections. The RBI also highlighted the issue of limited know-your-customer (KYC) processes for merchants and suggested stricter KYC requirements.

NPCI arm, banks, fintechs in talks to implement interoperable payment system

IndianStartupNews

IndianStartupNews · 1y ago

NPCI arm, banks, fintechs in talks to implement interoperable payment system

The Reserve Bank of India (RBI) has approved the launch of an interoperable payment system for net banking, aiming to revolutionize Internet banking transactions. The move is expected to offer faster fund settlements for merchants and enhance user confidence in digital payments. Currently, the lack of interoperability between payment aggregators causes inefficiencies and fragmented user experience. The RBI's goal is to increase digital payment transactions by over three times by 2025. Major banks and fintech firms are involved in discussions to implement the system, with the involvement of large payment aggregators indicating potential for a more competitive market.

PayU gets in-principle nod from RBI to be payment aggregator

Economic Times

Economic Times · 1y ago

PayU gets in-principle nod from RBI to be payment aggregator

Digital payments company PayU has received preliminary approval from the Reserve Bank of India (RBI) to operate as a payment aggregator (PA), allowing it to onboard new merchants onto its platform. The approval is seen as a significant milestone for PayU, showcasing its commitment to compliance and corporate governance. In 2022, the RBI had banned payment aggregators, including PayU, from onboarding new merchants, but PayU has now been granted permission to resume this activity. Despite facing challenges and competition in the industry, PayU has experienced notable growth, processing billions of transactions and increasing its revenue significantly.

RBI issues new rules for activating inoperative bank accounts, unclaimed deposits: KYC can now be updated via Video, any bank branch, business correspondent - The Economic Times

Economic Times

Economic Times · 1m ago

RBI issues new rules for activating inoperative bank accounts, unclaimed deposits: KYC can now be updated via Video, any bank branch, business correspondent - The Economic Times

The Reserve Bank of India (RBI) has introduced new rules to simplify reactivating inoperative bank accounts and claiming unclaimed deposits. KYC updates can now be done at any branch, through video-based verification, or with the help of Business Correspondents, making the process more accessible for customers. This initiative, effective immediately, aims to ease the reactivation of accounts dormant for over ten years and facilitate the claiming of unclaimed deposits.

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