Parity in payments

BY DEMANDING SCALE FOR PAYMENT AGGREGATORS, RBI IS PRIORITISING SYSTEMIC STABILITY IN THE LONGER RUN

- SANDEEP PAREKH

NDIA'S DIGITAL PAYMENTS revolution has been a story of speed and scale.

India today processes over 1.8 billion United Payments Interface (UPI) transactions a month, accounting for nearly half of the world’s real-time digital payments.While UPI, the crown jewel of the India Stack, has been a core driver of this growth, acceptance infrastructure has been equally crucial in supporting widespread adoption. This includes both offline payment solutions deployed at merchant locations such as QR codes and point-of-sale (POS) terminals and online solutions on e-commerce websites and apps.

Until recently, only online transactions were covered under the Reserve Bank of India (RBI) Guidelines on Regulation of Payment Aggregators and Payment Gateways (March 17, 2020) that delineated the roles of entities which constitute the core infrastructure, viz. payment aggregators (PAs), merchants, and acquiring banks. Offline transactions at merchant locations fell outside the scope of the above guidelines.

In its Payments Vision 2025 (June 2022), the RBI signalled its intention to harmonise practices and regulatory obligations across online and offline PAs. Shortly after, in its Statement on Development and Regulatory Policies issued in September 2022, it proposed to extend the existing regulations to offline PAs, recognising the similarities in their activities with online PAs and their overall significance in the payments ecosystem.

On September 15, the RBI released the Master Direction on Regulation of Payment Aggregator, repealing the earlier guidelines and introducing physical PAs (PA-Ps) as a subcategory requiring RBI authorisation. PA-Ps are defined as entities facilitating transactions where both the acceptance device and payment instrument are in close physical proximity when the transaction is made.