As per the information provided, a new category of licences is set to be included for financial services providers as the RBI focuses on enhancing the offline payments ecosystem. The regulator is projected to come out with guidelines for issuing licences to function in the POS businesses, with third-party POS operators being required to obtain licences to function in the space. Currently, the move is presumed to impact participants such as Pine Labs, MSwipe, Paytm, and BharatPe, among others. At the time of the announcement, RBI did not comment on the matter.
According to
The Hindu Business, by introducing a licencing framework, RBI intends to ensure improved operations and enhance the capabilities of both online and offline payment operators. Additionally, it is mentioned that regulated entities, including banks and NBFCs that are already in the POS business, are set to not be impacted by the change. On the other hand, third-party operators will be required to obtain a licence to continue the business, with them expanding considerably in this space and making a strong case in favour of licencing the ecosystem.
Furthermore, banks started to opt to function via third-party POS participants rather than in-house due to simplified management. Similarly to payment aggregator licences, POS operators are set to be required to comply with certain standards, including a minimum net worth of nearly USD 3,000,000 and passing the fit and proper conditions imposed by RBI. The licencing framework can support the enhancement of the Know Your Customer (KYC) process, as, at the moment, the third-party operators manage it, making it more prone to deficiencies. Moreover, data storage of POS transactions is governed by agreements between the issuing bank and third-party operators, with the number differing from one operator to another. To increase safety and security, the framework can impose a limit on this matter.
The licencing framework could also support fund management, as the settlement is not currently instantaneous, and it presents the risk of stocking cash by unregulated entities. Even if in recent years no lapses were announced regarding this, business increased substantially and became a concern for the regulator.
