RBI Introduces Draft Guidelines for Payment Aggregators to Enhance Regulations

The Reserve Bank of India (RBI) has unveiled draft guidelines aimed at strengthening regulations for payment aggregators (PAs) in areas such as know-your-customer (KYC) requirements, due diligence of merchants, and operations of escrow accounts. These guidelines are set to become effective within three months.

These new directives build upon the RBI’s existing guidelines for governing payment aggregators from 2020, 2021, and 2022. Payment aggregators are defined by the RBI as entities that enlist merchants and facilitate the consolidation of payments from customers to these merchants for the purchase of goods and services. They operate through one or more payment channels, either online or at physical Point of Sale (POS) terminals, using the merchant’s interface (whether physical or virtual), and then settle the collected funds with the respective merchants.

There are two main types of payment aggregators within the Indian payments landscape. These are PA-Online Points of Sale (PA-O) and PAs that enable face-to-face or proximity payment transactions, now termed as PA-Physical Point of Sale (PA-P).

With the updated definition of payment aggregators now encompassing providers of physical point-of-sale payments, companies like Innoviti Payments, Pine Labs, and MSwipe will be subject to regulatory oversight.

These new guidelines reflect the RBI’s ongoing efforts to enhance oversight and consumer protection within the payment aggregator space. They aim to ensure greater transparency, security, and accountability in payment transactions, ultimately benefiting both consumers and businesses operating in India’s evolving digital payments ecosystem.