How Indian fintech players can benefit from Amazon and Google’s inclusion in RBI’s list of payment aggregators

Local fintech players can benefit from the decision of the Reserve Bank of India to license big tech giants like Amazon and Google as payment aggregators in India, an expert has explained to Technext.

Bloomberg reports that Amazon and Google made it on the list of 32 companies that have been granted in-principle authorization to function as online payment aggregators by the Reserve Bank of India (RBI)

While these 32 businesses have received licenses, the RBI also disclosed companies whose applications are still being reviewed, including Indian start-ups like PhonePe and Cred’s parent company, Dreamplug Paytech Solutions. CAMS Payment Services and Ola Financial Services both had their applications denied.

Paytm, a very popular fintech startup in India, and PayU, which Naspers own, have both had their applications returned. Although these businesses can still act as payment aggregators, they are not permitted to add new merchants until they acquire the RBI’s approval.

According to a report by IndianExpress, Payym commented on the matter, saying,

We are in the process of reapplying (for the license)… This does not have any material impact on our online business and revenues. For the offline business, One97 Communication can continue to onboard new merchants and offer them payment services including all-in-one QR, soundbox, and card machines.

Although India’s Apex bank has stated that reviewing applications of payment aggregators is an ongoing procedure, the list will be updated fortnightly.

The RBI adopted this payment aggregator framework in March 2020, and applications and reviews continued until September 2022. Following the publication of this new list, only companies that have been approved can purchase and provide payment services to merchants, placing them directly under the regulator’s jurisdiction.

Who are payment aggregators?

Aggregators of payments act as intermediaries between customers and companies. These third-party provisioners let customers pay quickly and easily, allowing businesses to handle their transactions effectively.

Businesses can accept various online payment methods with the aid of payment aggregators without opening a separate merchant account with a bank or financial services provider. By obtaining a license from the Reserve Bank of India, online payment aggregators can integrate digital merchants and collect payments on their behalf.

The 32 firms that the RBI has approved have net worths of at least Rs 15 crore in the first year of application and at least Rs 25 crore by the second year, and they are all compliant with the international payment security standard.

According to RBI regulations, these are essential requirements for the application process.

But what does this mean for these international companies and India’s fintech ecosystem?

For India. the idea to approve these international companies as licensed payment aggregators in their fintech ecosystem might be a way for the country to kickstart a friendly global accepting space while developing more competent, better-managed international operations.

Technext spoke with Jeffrey Williams-Edem, a financial analyst with over 11 years of experience in the fintech industry, about India’s RBI decision. He explained that this might be one way the encourage local brands.

This involves certain liabilities that certain types of brands can manage and have the kind of liability capabilities. Being new, they possibly want people who have the right technology and experience to start with.

According to him, some of the local brands might not yet have the capacity to manage the volume. Still, regardless this will also enable local tech collaboration with such global brands and encourage knowledge share.

He further said the relationship wIth these international companies could act as a good link.

They can act as anchors to support the Indian ecosystem. It will also enable the government to bring in cross-border transactions and collaboration. It will also make price control better and fair across all players, giving a fair advantage to all local players to work with their brands and no capitalism.

What else does RBI have for its fintech ecosystem?

The Indian FinTech ecosystem has grown to become a powerful global force. In 2022, India was the third-largest Fintech environment globally, according to research by LinkedIn.

However, just like every other fintech ecosystem, the objective is to open the doors for global exposure, as this will promote ecosystem investment prospects and worldwide attention.

While digital adoption has accelerated for the Indian fintech sector. It has also seen a variety of movements in laws and policies that would help foster the sector’s growth.

This is merely one of them, as the Reserve Bank of India has numerous regulation plans for its fintech sector. IndiaExpress reports that the RBI is creating a “white-list” of digital lending apps in the nation to stop the growing misconduct in the ecosystem for digital lending.

All digital loans must be distributed and reimbursed through regulated businesses’ bank accounts exclusively, without lending service providers (LSPs) or other third parties’ pass-through, according to tight guidelines set by the RBI in August 2022 for entities engaged in digital lending.

Earlier this month, The Ministry of Electronics and IT (MeitY) temporarily banned 94 digital lending apps, including businesses from India like LazyPay and Kissht. Numerous corporations, including Google, have discussed the problem of loan apps.

The bank accounts of numerous illegal loan lenders were frozen by the Nigerian Federal Government last year. Google has also warned that it would remove any lending apps with improper license attribution and declarations in some African countries, including Nigeria and Kenya.

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