The Reserve Bank of India (RBI) guidelines are giving nightmares to startups and fintechs as its deadlines are looming ahead. With this , the first one prohibits payment aggregators from storing customer card details. While the other adds friction to the structure of the recurring payment.
Startups and fintechs believe that both these guidelines may increase compliance burden. It also may significantly worsen the user experience on their platforms.
Prior to this, the RBI released guidelines for payment aggregators and payment gateways (PA/PG Guidelines) in March 2020.
According to this, only non banking payment aggregators approved by the central bank could offer payment services to merchants. Now, the deadline to comply with these guidelines is coming closer on December 31, 2021.
The other RBI guideline will kick in after September 30, asking an additional authentication layer for recurring payments. The guideline is expected to disrupt firms that offer subscription-based services.
On the other hand, RBI’s motive to implement these guidelines was to improve the security of online transactions amid increasing cybersecurity risks. Further, the industry executives also believe that they have some unintended consequences.
Large companies, such as Amazon, PhonePe, Zomato, and CRED have applied for a payment aggregator license with the RBI.
So that they can have a greater level of control over payments taking place on their platform, as per the sources.
But the newer fintech entrants may be left out.