Fintech firm PayU Payments has received the Reserve Bank of India’s in-principle approval to operate as a payment aggregator and onboard new merchants onto its platform. The firm, backed by Prosus, can now on-board new merchants and provide them digital payment services.
The RBI’s move to tighten scrutiny of the payments sector aims to enhance transparency and accountability in online transactions. PayU is a payment gateway that also offers services including buy-now-pay-later, and competes with the likes of Tiger Global-backed Razorpay and Walmart-owned PhonePe.
Last year, the RBI returned the fintech firm’s application to operate as a payment aggregator due to its complex corporate structure and directed it to reapply. Following this, PayU had to pause on-boarding new merchants for its online payment aggregation business.
Similar bans were imposed on Paytm, Razorpay and Cashfree. Of which, the latter two received their approval in December last year, while Paytm continues to await for its approval.
Anirban Mukherjee, Chief Executive Officer (CEO) of PayU, said: “This licence is pivotal in our mission to establish a globally renowned digital payment infrastructure rooted in India. Aligned with the government’s Digital India initiative and the RBI’s forward-thinking regulations, we are dedicated to driving digitisation and financial inclusion, particularly for small merchants.”
By requiring payment firms to actively monitor merchant activities on their platforms, the RBI seeks to mitigate potential risks associated with digital payments, such as fraud, money laundering, and non-compliance with regulations.
The new guidelines underscore the need for robust due diligence processes and real-time monitoring of merchant transactions. Payment firms will be expected to implement robust risk management frameworks, including know-your-customer (KYC) procedures, transaction monitoring, and reporting mechanisms.
This proactive approach aims to safeguard the interests of consumers and maintain the integrity of the digital payments ecosystem. Furthermore, the RBI’s directive aligns with global efforts to combat financial crimes and promote a secure and transparent digital financial landscape.
By enhancing oversight and imposing stricter compliance requirements, the central bank aims to instill greater confidence among consumers and businesses, fostering the continued growth and adoption of digital payment solutions in India.
A payment aggregator consolidates the merchant accounts and payment gateways of multiple businesses into a single platform, streamlining the payment process. This approach offers several benefits to businesses, particularly small and medium-sized enterprises (SMEs). Firstly, it eliminates the need for individual businesses to undergo lengthy and often costly application processes with banks and payment processors. Payment aggregators have already established relationships with these entities, making it easier for businesses to get set up for accepting electronic payments.
Furthermore, payment aggregators typically provide a user-friendly interface that allows businesses to manage their payment operations from a centralized dashboard. This includes features like tracking transactions, generating reports, and handling refunds or chargebacks.
Payment aggregators enable businesses to accept a diverse range of payment options without the upfront work, whether payment is by credit card, debit card, e-wallet, or bank transfer.
PayU offers payment gateway solutions to online businesses, catering to a vast network of over 450,000 merchants and providing access to a diverse range of payment methods, totaling over 100 options.
In the fiscal year 2023, PayU India announced a revenue generation of $400 million, marking a significant growth of 31% from the previous financial year. Within the first half of FY24, revenues from its primary payments business increased by 15%, reaching $211 million. This improvement was primarily attributed to contributions from existing merchants and enhancements in payment processing solutions provided by Wibmo, as well as developments in its omnichannel operations. It should be noted that during this period, the acquisition of new merchant accounts was put on hold.
The FY24 results are awaited.