RBI Eases Expansion Norms for Payment Aggregators

The Reserve Bank of India (RBI) has announced new guidelines allowing fully licensed payment aggregators (PAs) to expand into new segments, such as cross-border (CB) payments, with significantly streamlined approval processes.

Key Changes:

• Fast-Track Expansion:
  • Fully licensed PAs can now commence operations in a new PA category by simply notifying the RBI 30 days in advance, compared to nearly one year previously for separate approvals.
• Scope of Expansion:
  • Most fintechs start with a domestic PA license and later expand into PA-CB for cross-border payments.
  • Compliance requirements for PA-CB are largely similar (≈80%) to a regular PA license.
• Certificate of Authorisation (CoA):
  • Only PAs with a CoA issued by RBI can enter new categories.
  • Notification must occur at least 30 days prior to commencing operations.
• Current Landscape:
  • 56 fully licensed online PAs and 6 PA-CBs currently operate in India.
  • PA-CBs handle cross-border transactions for imports and exports of permitted goods and services.
• Compliance and Oversight:
  • PAs must actually engage in the new business; simply holding a license without operations is not allowed.
  • All players remain subject to RBI audits.
  • Relaxed norms come with the responsibility to demonstrate genuine business activity.
• Implications:
  • Faster market entry could accelerate growth in lucrative cross-border payments.
  • Streamlined approvals may increase competition in PA-CB space, which currently has higher margins due to fewer players.
  • RBI retains oversight to mitigate risks to the broader payments ecosystem.