These fintech players face a possible rejection of their payment aggregator licence applications, the people told ET.
The scrutiny comes in the backdrop of some of these fintech firms having dealings with cryptocurrency exchanges and gaming apps, one person said.
Cashfree has faced tough questions regarding merchant partnerships for its payouts business, know-your-customer (KYC) norms, its net-worth criteria, and for onboarding betting apps as clients, the people said.
A regulated payments ecosystem
“The regulator is clearly not okay with payment aggregators having dealings with cryptocurrency companies, or with gaming apps which have in the past been accused of being a conduit to launder money,” a person directly aware of the development told ET.
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Another person said the RBI has decided to reject the payment aggregator licence of ZaakPay, the payment gateway service of MobiKwik, due to its crypto partnerships and for not meeting the laid-down net-worth criterion.
Payment aggregators are expected to show a net worth of Rs 15 crore on the date of their applications or as of March-end 2021, and of Rs 25 crore by the end of the ongoing fiscal year (FY23), according to the RBI rules.
When contacted, a spokesperson for Cashfree said, “Our payment aggregator licence application is under consideration by the RBI. We decline to comment on baseless speculation.”
MobiKwik refused to comment.
To be sure, these players may finally end up getting the licence, another person said on condition of anonymity.
ET was the first to report last year that multiple Indian payment gateways had come under the scanner of the Directorate of Enforcement (ED) for allowing customers to transfer money to Chinese betting apps. Cashfree was one of the firms under the investigative radar.
Over the past few months, the central bank has been holding presentations with payment gateways and the other fintech firms that had applied for a payment aggregator licence.
The RBI has not provided any licences yet, but it has been quickly informing those companies whose applications have been rejected, people familiar of the matter said.
At least 185 fintech firms — including big names like Cred, Razorpay, and PhonePe — had submitted proposals seeking payment aggregator licences.
The payment aggregator framework, introduced formally in March 2020, mandates that only firms approved by the RBI can acquire and offer payment services to merchants.
The firms authorised to operate as payment aggregators in India will come under the direct purview of the RBI while rendering payment services to merchants.
This is a step that many industry insiders said would lead to a more standardised and regulated payments ecosystem. “In the case of Cashfree, there has been a lot of back and forth between the regulator and the company for some time now, with questions being asked about its KYC risk-engine as well as partnerships with crypto exchanges. The RBI isn’t convinced about Cashfree’s application,” one person who is privy to the development said. “However, the RBI is also concerned about the smaller merchant base which will be impacted with the rejection.”
Cashfree, in which State Bank of India had invested last year, currently offers payment services to over 100,000 merchants, with the platform processing $25 billion in total payment value annually.
If an application is rejected, merchants have about three months to stop using a gateway’s service. The RBI is, however, also thinking of extending this time frame to six months, sources said.
The banking regulator is specifically concerned about the payouts business of these payment gateways. These players had separately written to the RBI to explain how they were processing such payouts, the people cited earlier said.
On merchant partnerships, the RBI — during its due diligence for granting a payment aggregator licence — will also check on aspects related to what percentage of the business revenue comes from unregulated entities such as online betting or crypto exchanges.
It will also evaluate money-laundering concerns as well as whether these aggregators are compliant with its tokenisation norms.
“The RBI does not appreciate payment providers powering the cryptocurrency industry in any shape or form, whether it is supporting the trading or providing their platform for any other use-cases,” said the first person cited in the story. “That is the first call for immediate rejection. The RBI is also taking note of what KYC norms are being followed by these payment platforms, with the remotest risk identified leading to rejections. There is no scope of negotiation this time.”
