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RBI Plans Licensing Framework for POS Operators to Ensure Fair Play

April 16, 2024

RBI Plans Licensing Framework for POS Operators to Ensure Fair Play

The Reserve Bank of India (RBI) is preparing to introduce a new licensing system for point-of-sale (POS) operators, which is expected to impact major players like Pine Labs, MSwipe, Paytm, and BharatPe, as per reports.

The aim is to create consistency and fairness between online and offline payment operators. While banks and NBFCs currently in the POS sector won’t be affected, third-party operators will need licenses to continue their work. The number of third-party operators in offline payments is higher than regulated entities, handling around Rs 400 crore daily, compared to Rs 1,000 crore in online payments.

The RBI’s move is proactive, aiming to manage potential issues as the offline payment market grows. Banks prefer third-party POS players for their efficiency over in-house operations.

POS operators may have specific requirements, like a minimum net worth of Rs 25 crore and meeting RBI standards, similar to payment aggregator licenses. However, if licenses become mandatory, it may affect BharatPe and Paytm, awaiting RBI approval for payment aggregator services.

The need for licenses is due to three main issues. Firstly, cash loans on credit cards are increasing, suggesting cash transactions by merchants handling POS. Secondly, data storage rules vary between operators. Lastly, third-party operators’ fund management raises concerns due to delayed settlements.

Despite no major issues, the rapid growth in recent years has brought these concerns to light.

The RBI’s proposal for POS operator licensing aims to increase oversight and address issues like cash loans, data storage, and fund management, ensuring fairness and security in financial services.

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