Cashless Consumer has recommended full and direct regulation of payment aggregators and payment gateways, “with significant changes to scope and modalities of regulation“. It also said that RBI should not prohibit PAs and PGs from dealing with merchants who do not have a physical presence in India. Cashless Consumer made these recommendations in its submission to the Reserve Bank of India in response to the RBI’s discussion paper on guidelines for PAs and PGs. Cashless Consumer is a consumer awareness collective that focusses on digital payments.
The key recommendations have been summarised below:
Recommendation 1: Implement on-tap licensing/authorisation notified for payment aggregators and payment gateways. This is because existing PAs and PGs do not have any licensing criteria.
Recommendation 2: Do not prohibit PGs and PAs from dealing with merchants who do not have a physical presence in India as it limits the scope of e-commerce businesses that act as payment intermediaries. Substitute “physical presence of merchants” with “legal entity identifier/bank account in the country” instead.
Recommendation 3: Impose a multi-tier approach for capital requirements which is proportional to transaction processing volume to help new entrants enter the PA/PG scene without compromising on consumer protection needs. As it is, PAs and PGs do not handle funds; Funds are held by banks even when they are in transit.
Recommendation 4: PAs/PGs must not share consumer data as this will violate the privacy of consumers. The consumer data is used by PAs/PGs for transaction purposes and should not be used for credit profiling/monitoring. This issue cannot be left to privacy policy of the payment aggregators and processors and therefore.
Recommendation 5: PAs/PGs should come under RBI’s Ombudsman Scheme for Digital Transactions 2019 framework for any complaints that are not resolved within the internal grievance redressal mechanism under the nodal officer.
Recommendation 6: Add an agreement between PAs/PGs and merchants on merchant data and its usage rights as it has been observed that many aggregators use merchant transaction data to provide other financial services. Thus, explicit consent must be taken for using merchant data for purposes other than transactions and processing.
Recommendation 7: Harmonise customer grievance redressal and dispute management framework. PAs/PGs should publish the customer grievance redressal report that is made to RBI on their websites. Gateways and aggregators should also be made part of the harmonisation of ‘Turn Around Time’ (TAT) and customers’ compensation for failed transactions, using authorised payment system. Also, PAs and PGs should make payments, not the issuer, in case they are solely responsible for failed transactions.
Recommendation 8: Do not treat issuers and intermediaries at the same level for KYC/AML provisions as this will increase the cost of providing services with no tangible benefit. Further, provide evidence of money laundering cases that happen through aggregators and gateways.
Go deeper:
- RBI should cover all payment intermediaries for payment instruction: NASSCOM
- Distinguish between regulations for payment aggregators, payment gateways: Dvara Research to RBI
- RBI should obtain self-certification from relevant e-commerce companies: CUTS to RBI
- ‘Implement full, direct regulations for payment aggregators and gateways’: Vidhi to RBI
