RBI to bring POS players
under license regime
It appears that a new category of licenses is soon to be added in
the world of financial services. To tighten the offline payments ecosystem, the Reserve
Bank of India (RBI) is expected to come out with guidelines for issuing
licenses to operate in the point of sales (POS) business. Third-party POS
operators would have to obtain licenses to function in the space. The move is
expected to impact players such as Pine Labs, MSwipe, Paytm and BharatPe to
name a few.
According to highly placed sources, the objective of introducing a
licensing framework is to ensure harmony in operations and establish level
playing field between online and offline payment operators. Regulated entities
such as banks and NBFCs who are already in the POS business won t be impacted.
However, third-party operators will have to obtain a license to continue
business, said the source.
Third-party operators growing faster than regulated entities in
this space has also made a strong case in favour of licensing the ecosystem. To
put things in perspective, third-party offline payments operators are estimated
to be maintaining daily average balances of ₹400 crore vis- -vis
₹1,000 crore seen in the online space. It is best to bring about
regulatory changes before the offline market becomes too big, said a senior
executive of a payment company.
It is understood that that in recent years, banks have opted to
operate through third-party POS players rather than doing it in-house due to
ease of doing business. Similar to payment aggregator licenses, POS operators
may have to comply with certain norms such as minimum net worth of ₹25
crore and passing the fit and proper conditions of RBI.
An email to RBI on the matter remained unanswered till going to press.
If the licenses are made mandatory, it would be interesting to see if players
such as BharatPe and Paytm, who are yet to get RBI s nod for payment aggregator,
will be allowed to operate in the offline POS segment.
Cash for swipe
The need for a licensing framework is said to have assumed
importance for three reasons.
According to sources, cash loans on credit cards is increasing in
informal sector with a steep surge in high-value, one-time swipes at POS
recently witnessed by the industry. It is believed that the merchant handling
the POS may be handing out cash for these swipes. Right now, the third-party
operators are responsible for KYC. But the system isn t foolproof to detect and
act against deficiencies, said a CEO of a POS company.
Secondly, data storage of POS transactions is governed by
agreements between the issuing bank and third-party operators. Some people
store data for 90 days and some do it for six months to a year, based on
internal agreements, said another CEO of a payments entity. For security
reasons, there needs to be harmony in such practices.
Fund management
Lastly, there are concerns about fund management with third-party
players. Settlement to merchants isn t instantaneous and there is usually a
day s lag. There is a risk with unregulated entities stocking cash and makes a
case for bringing online payment aggregators at par with offline POS players.
Given the extent of money handled by POS players, there is no recourse if a fly-by-night
operator decides to wind down with the money. That s a huge risk, said a CEO
quoted above. While no major lapses on this front has surfaced so far, with the
business growing multifold in the recent years, this has emerged as a key
concern to the regulator.
www.thehindubusinessline.com dt. 15.04.2024