84. Licence
Ian Fleming’s James Bond is one of my favourite characters (after Jason Bourne but before Jack Ryan)
James Bond has ‘Licence’ to kill
Wonder who issued that one. Who cares… I love the action and catchy lines (Name is Bond… James Bond) of 007.
Sadly, this article is not about James Bond but about ‘licence’… that also payment licences. (Cliched opening paragraph… isn’t it?)
Let me start with the good news first.
After more than 2 years since the PA/PG application deadline, RBI issued licences to the first set of 6 companies (refer to this list) [First few names of many more to come — here].
This is extremely important for Cashfree and RazorPay as both were under embargo (couldn’t onboard new merchants) for a year or so. With the licence, they can start onboarding merchants.
Congratulations!
Onwards and upwards!
New Licence: PA-CB (Cross Border)
In Nov ’23, RBI issued the new guideline to regulate companies that operate cross-border payments. (Link to regulation)
In earlier article, we did talk about cross-border payments (article)
In summary, there are two types of cross-border payments — inward (money comes to India i.e., Non-INR → INR) and outward (money leaves India i.e., INR → Non-INR)
There are different models when it comes to cross-border payments (refer above diagram or read this article), but regulation is specifically for the OPGSP Import and Export model.
a. OPGSP Export: Product/service is exported and the money comes to India (non-INR → INR)
b. OPGSP Import: Product/service is imported and the money goes outside India (INR → Non-INR)
These companies were governed by OPGSP (Online Payment Gateway Service Providers) guidelines and in Apr ’22, RBI issued draft OEIF (Online Export-Import Facilitators) guidelines with intention to replace OPGSP guidelines.
On 31st Oct 2023, RBI issued PA-CB guidelines
PA-CB guidelines define three distinct licences for entities
- PA-CB-E (Export): To move funds inside India against export of goods/services
- PA-CB-I (Import): To move funds outside India against import of goods/services
- PA-CB-E&I (Export and Import): To do both activities
Note: Irrespective of the model, the entities would need AD-I (Authorised Dealer) bank to move the funds
Also, the guidelines clearly defined different application timelines and net-worth requirements for existing and new entities
- Existing non-bank PA-CBs are the ones presently operating cross-border services (under OPGSP). These companies can be PAs (E.g., Cashfree, BillDesk) and non-PAs (e.g., Skydo, EximPe).
- New PA-CBs are the ones who do not have cross-border business.
Here is the summary of the PA-CB guidelines
Any guideline should be read along with the related guidelines as well as past guidelines. If you are interested then read these guidelines — OPGSP, Master KYC, PA/PG guidelines
More to come?
Various types of entities have been regulated or require licences or authorisation to operate — Banks, NBFCs, PPIs, BBPOUs.
Here is the list of authorised PSOs (Payment System Operators)
Now, PAs are getting licences and soon cross-border PAs will get licences.
With Digital Lending Guidelines, RBI has defined the way Digital Lending Apps, LSP and NBFCs should operate.
RBI is planning to introduce a regulatory framework for loan aggregation service. This will directly impact the PA (Payment Aggregators) who aggregate various BNPLs and cardless EMI products as payment modes and show on merchant’s sites/App.
It is quite possible that other types of entities or business models. Think about it, eventually payout or TSPs/orchestrators may come under some sort of authorisation or regulations or licensing.
Licensing is important, as it authorises only selected entities to operate and allows the regulator to enforce rules, policies and processes to safeguard customers, merchants knows through which entities they should take service, curb money laundering or terror financing.
