RBI asks Visa and Mastercard to halt B2B fintech payments

The current announcement is set to only impact a small set of payments, with the Central Bank asking Visa and Mastercard to suspend all such transactions. However, regular payments conducted to businesses via corporate cards are set to not be influenced by this adjustment. Representatives from Visa stated that the company received a communication from the RBI at the beginning of February 2024, which mentioned an industry-wide request for information on the role of BPSPs in commercial and business payments. The communication directed that the card network should hold all BPSP transactions in suspension. At the time of the announcement, Mastercard did not respond to the request for comment. Additionally, neither did the RBI, India’s central bank which regulates the country’s payment systems, comment on the matter. Allegedly, the RBI’s recent move is based on concerns regarding the flow of money through the card route toward non-Know Your Customer (KYC) compliant businesses, as their bank accounts might be KYC verified, but they are not authorised to accept card payments as merchants.

Furthermore, it was reported  that RBI asked card networks, including Visa and Mastercard, to halt such card payments and, as a response, Visa underlined that it continues to discuss this matter with the RBI and its ecosystem of partners, aiming to comply with regulatory requirements. Also, the company mentioned that BPSPs operate under regulations and licencing guidelines and confirmed its proactive engagement with the RBI. Visa’s notice includes the company’s request for all BPSP merchants registered by themselves with Visa to suspend their operations until advised differently. Moreover, the company highlighted that failure to adhere to its instructions could result in regulatory sanction and non-compliance assessment under the Visa rules.

The RBI focuses on compliance through robust KYC solutions, with the regulator encouraging businesses to adopt a compliance-first approach for sustainable growth. Considering the current announcement, businesses need to adhere to the regulator’s guidelines and ensure that all transactions take place within the regulatory framework and that no fraudulent activity occurs during transactions.

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