New KYC rule spells heartburn for payment aggregation firms
if a business is legitimate.
“It would have made more sense had the KYC exercise been done by the banks, which have greater presence at various corners of the country,” said Parijat Garg, a fintech expert. “Getting PAs to do full KYC after bank accounts have already been vetted could disrupt their businesses and impact those accepting digital payments.”
Garg, however, acknowledged that RBI’s intent was to curb fraudulent practices and track money movement better. Since payment aggregators handle sizeable digital payments, he said, the regulator wants to include additional checks through these entities.
Other industry experts say RBI’s proposals are a mixed bag, both clarifying prevailing ambiguities and raising the bar on things like KYC.
According to Vishwas Patel, joint managing director of fintech Infibeam Avenues Ltd and chairman of the Payments Council of India (PCI), RBI’s draft brings uniformity across all payment aggregators, online and offline.
“The KYC norms are now clearly defined, but some of our members are finding the KYC of the smaller merchants stringent and not cost-effective, hence PCI will relay some comments to RBI on the draft notification this week,” said Patel.
The founder of another fintech company said onboarding costs could go up from ₹200 per merchant to ₹500 if these new guidelines are implemented. He said the idea behind the draft circular is more about ‘know your business’—to check if a business is doing what it says it does on paper—than KYC.
“Someone can go and verify that the business exists but that increases the cost. At present we do background checks and see if a seller is actually linked to the website where a customer pays for that particular product or service,” said the founder of the fintech firm cited above, adding that even at present merchant transactions happen through KYC-ed bank accounts and therefore a money trail is established.
“We understand that RBI wants to check frauds,” this person said, “but transactions are still being routed through bank accounts and are not hidden from the system.”