Awaiting clearance on PA license, fintechs diversify into credit offerings

Meanwhile, other payment majors awaiting a decision expect to receive a nod in the first half of the next year

Days after the Reserve Bank of India (RBI) approved fintech platforms like Cashfree Payments and Razorpay to operate as payment aggregators (PAs), other major digital payment players such as PayU and Paytm that are awaiting clearance are exploring diversification into additional financial services, including credit and other value-added offerings.

“We have resubmitted our application to the RBI and are waiting for a decision. We have diversified our business model significantly since our foray into the Indian market. While payments constituted 99 per cent of our revenues in the financial year 2019 (FY19), this figure has now been reduced to 53 per cent, pointing to our successful foray into credit and infrastructure services,” a PayU spokesperson said in response to queries sent by Business Standard. 

The other payment majors that are awaiting a decision expect to receive a nod from the regulator in the first half of the next year.

“We were hopeful to get the payment aggregator license this time or by January. We believe this is a phased process. The company is hopeful to receive regulator approval within the first few months of 2024,” said an executive at one of the affected companies. 

Paytm did not answer the queries sent by Business Standard.

Industry sources believe that certain companies may be facing delays in receiving regulatory approval due to insufficiently addressed compliance policies.

“There would be questions raised about merchant onboarding and monitoring policies, and general compliance with respect to RBI guidelines. There is a high bar that is set by the regulator when it comes to compliance, and that has to be met,” a person close to the development said, requesting anonymity. 

Companies who have received the payment aggregator (PA) license from RBI explained that applicants are required to fulfill the criteria listed in the payment aggregator guidelines to be eligible.

"The licensing process requires applicants to fulfill the criteria listed in the payment aggregator guidelines. A system audit report is submitted as part of it and the RBI needed us to work on certain observations that were made and work on the system audit report in general. Our company was focused on fulfilling those regulatory requirements and taking into account observations by the regulator," said Reeju Datta, Co-founder, Cashfree Payments.

Datta added that the company works with over 300,000 merchants currently, and used to get around 30,000 merchants leads before the embargo was placed on the company in December last year.

Earlier this week, the RBI approved fintechs such as Cashfree Payments, Razorpay, Google Pay, Enkash, among others to operate as payment aggregators.