India’s fintech sector faces another regulatory hurdle as the Reserve Bank of India (RBI) instructs Visa and Mastercard to cease card-based commercial payments by companies. This directive, reported by Journalist Arti Singh, affects fintech players facilitating such transactions, including Enkash, Karbon, and Paymate, known for enabling payments to suppliers and vendors via cards.
A founder of a fintech startup who has received the notice, informed ET (on condition of anonymity), “An instruction has come to
come to the fintechs which operate in this sector to pause business payments made by commercial cards until further notice.”
As per some reports, credit card enabled payments for rental, tuition fees etc offered by NoBroker, Cred and other fintech companies will be crippled after this decision.
#Exclusive After Paytm Payments Bank and a set of lending companies, Reserve Bank of India has now come hard on fintechs offering commercial/corporate cards. According to three sources, RBI has asked Visa and Mastercard to stop transactions of vendor payments.
— Arti Singh (@artijourno) February 14, 2024
While there has…
RBI’s Concerns and Fintech Challenges:
The RBI’s decision to curtail card-based commercial payments stems from concerns over KYC compliance and merchant eligibility. Notably, the central bank has expressed dissatisfaction with merchants failing to adhere to KYC norms and those ineligible for card payments. This move adds to the regulatory challenges faced by Indian fintech firms in recent years, exemplified by Zestmoney’s closure following RBI guidelines and directives impacting BNPL firms.
The regulatory landscape for fintech firms in India has undergone significant changes, notably in June 2022 when the RBI prohibited non-bank prepaid instrument issuers from extending credit lines through prepaid payment instruments like cards and wallets. Subsequent guidelines, such as the first loan default guarantee (FLDG), further impacted BNPL firms. Moreover, Paytm’s recent challenges, including the RBI’s directive to Paytm Payments Bank (PPBL) and its subsidiary services, reflect the broader regulatory scrutiny faced by fintech giants. Paytm’s shares have plummeted on the stock exchange in response to these developments, signaling ongoing challenges in India’s fintech ecosystem.
