As a spate of frauds has started to hit customers, the Reserve Bank of India(RBI) has decided to review the business models of payment aggregators due to unauthorised sharing of financial data, reported Business Standard. The central bank has asked for information from these entities on their activities, including the sharing of customer data, the sources said.
Payment aggregators are entities which enable e-commerce sites and merchants to accept various payment instruments from customers for completion of their payment obligations. The RBI’s approval is mandatory to become a payment aggregator. The RBI has mandated a minimum net worth of ₹15 crore by March 2021 and ₹25 crore by March 2023 for such entities, wrote Business Standard.
Since the abolition of the merchant discount rate (MDR) on the unified payments interface (UPI) and RuPay transactions two years ago, payment aggregators have been facing a tough time to generate revenues. Earlier, they used to generate revenues by processing payments for the merchants.
“Payment aggregators invested a lot in developing their payment infrastructure. After the MDR was abolished, their revenues were impacted, because they stopped making any money by processing the transactions,” said an official from the payments industry.
“As a result, they are now trying to monetise the payment data by sharing it with NBFCs (non-banking financial companies). They also tie up with NBFCs and sell loans on their behalf to earn a commission,” the person added.
The largest players among payment aggregators are PhonePe and Google Pay and they manage over 80 per cent of the transactions processed through UPI. In the current financial year, UPI has processed a little over 40.49 billion transactions worth ₹74.51 trillion. This is almost double the number of transactions reported in FY21. Paytm, BharatPe, CC Avenue, Pine Labs are the other major payment aggregators. ICICI Bank, HDFC Bank, and some other private banks are also in this business.
The sources in RBI indicated that the department of supervision has been tasked with engaging with payment aggregators and other players in the payment ecosystem to find out the issues.
“The aggregators have the actual data on payments. The data is then used for making lending decisions; the aggregator who sells the loan on behalf of the NBFC earns a fee,” the source quoted by BS said.
“The RBI is trying to understand how data sharing works, whether they are taking consent from the customer to share the data. Whether the loans they are extending are on their books or in the books of some other entities,” the source said.
The development comes at a time when a host of payment aggregators have queued up for NBFC licences. Sources said the RBI wanted to understand the issues of these entities before extending licences.
According to a RBI’s working group report, there were nearly 1,100 lending apps for Indian android users across more than 80 application stores during January 1- February 28, 2021.
Of these, 600 loan apps were illegal. The RBI even wrote to the ministry of finance in the past, asking for coordinated actions against such lending platforms.