Reserve Bank wants stricter rules for e-commerce payments gateways

Digital payments
E-commerce marketplaces acting as payment gateways and payment aggregators to other merchants will stop the activities in three months unless they separate this business and comply with all regulations, according to a discussion paper released by the Reserve Bank of India (RBI) on Tuesday.


Payment gateways and payment aggregators refer to entities, which provide technology infrastructure to route and facilitate processing of an online payment transaction and perform other functions without actually handling the funds.


They also facilitate e-commerce sites and merchants to accept payment instruments from customers for completion of their payment obligations to the merchants. Apart from handling funds, they get access to customer data.


"If they desire to pursue this activity, it shall be separated from marketplace business and the separate entity shall comply with the regulations," the discussion paper, which also discussed draft guidelines on such companies, said.


However, as banks are already regulated by the RBI, the payment gateway services provided by them need not require a separate authorisation as these activities form part of regular banking business, the RBI said.

The discussion paper noted that the existing rules have worked well for payments gateways and aggregators, and therefore can be continued. That, indeed, is the first option that the discussion paper offered. There are two other options - one, to change the rules somewhat, and another an entire set of new guidelines.


Banning payments gateways of e-commerce companies for other merchants is part of the third option.


The draft said the payment aggregators should have a minimum net worth of Rs 100 crore and if they don't manage to arrange that money within one year of putting out final guidelines, they should stop doing their business.


“Existing payment gateways and payment aggregators shall apply for authorisation; however, they shall be given one financial year (from the date of issue of guidelines) to comply with the entry point norms and other technology, security, storage, etc, norms issued in this regard," the draft said.


Further, the authorised payment gateways and payment aggregators should also, if required, maintain the funds received from customers in an escrow account with a bank.


These entities should be subjected to both on-site and off-site monitoring.


The entities should have a nodal officer responsible for regulatory and customer grievance handling functions whose details are prominently displayed on their websites.


The payment aggregators should have formal, publicly disclosed customer grievance redressal and dispute management frameworks. This must mention the escalation matrix and turn-around times for complaint resolution.


"The customer and the merchant complaints shall be promptly handled/disposed of by the payment aggregators and payment gateways as per their board-approved policy, within a period of seven working days of receipt of complaint by the payment aggregator."


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