Razorpay Founders Shashank Kumar & Harshil Mathur
Payments gateways and B2B neobanking platform Razorpay confirmed in a statement on July 11 that the company has been granted an in-principle approval by the Reserve Bank of India (RBI) for a payment aggregator (PA) licence.
Moneycontrol was the first to report on July 8 that Razorpay, Pine Labs and American payments company Stripe are the first few players to bag RBI’s in-principle nod.
Besides these three companies, fintech startup 1Pay Mobileware, too, received an approval from RBI for the licence on July 8, the company had said in a statement.
Commenting on the development, Harshil Mathur, CEO & Co-founder of Razorpay, said, “We are really excited to have received our Payment Aggregator Licence. This event only further strengthens our commitment to never stop reinventing.”
“With the digital payments space coming under direct RBI regulation, we can expect to not only see an immense upsurge in online payment adoption and trust but also witness a magnified surge in digital payment innovations in the coming years,” he added.
In a new set of guidelines issued in March 2020, RBI had mandated that all PAs shall be authorised by RBI. For this, the regulator instructed non-bank companies offering PA services to apply for authorisation by June 30, 2021, which was later pushed to September 30, 2021.
The decision on granting the license has come after a period of assessment of the applications. The norms made it important for all payment gateways including Razorpay, CCAvenue, Stripe, BillDesk, PayU, Cashfree etc to acquire a license to continue. The few firms authorized to operate as payment aggregators in India will come under the direct purview of the RBI.
Under RBI’s strict evaluation process, more than 185 fintech enterprises and startups submitted their proposals for a PA license, Razorpay said.
In a tweet on July 9, Pine Labs CEO Amrish Rau too confirmed that the company has received in-principle approval from RBI for the PA license.
For Pine Labs, the nod has come close on the heels of the company’s subsidiary Setu receiving the nod from RBI to function as an Account Aggregator (AA).
This week we were fortunate to get 2 major licences – Account Aggregator & Payment Agg/Gateway.
There are many companies which have patents/licences, however the winners are ones who innovate & deliver value to customer. Our acceleration starts now https://t.co/LZRs3u0QfD
— Amrish Rau (@amrishrau) July 9, 2022
Besides, a host of other players including PhonePe, BharatPe, Cred, Tata Group, Amazon, Reliance Industries, Zomato too applied for the PA license. RBI is expected to inform more eligible players on approvals in the coming weeks and is also expected to officially announce the names of companies that have been granted the in-principle nod.
For e-commerce and other players, in the absence of the license, they will either have a tie-up with a bank that can aggregate payments on their behalf, driving up costs for payment collections services. Or, they will have to depend on a PA, leading to more business for these licensed entities
A payment aggregator provides payment services for merchants and e-commerce sites by accepting payment instruments from customers. As part of the process, they pool the funds received from customers and transfer them to merchants after a certain time.
Payment gateways, on the other hand, simply provide technology services to businesses for processing transactions. They do not have any involvement in handling of funds.
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