A report suggests that the RBI would shortly release a licence framework for point-of-sale operators

According to a Hindu Businessline story, the Reserve Bank of India (RBI) is expected to shortly develop criteria for giving licences in the point of sale (POS) market, therefore creating a new category under financial services.

According to the article, which cited sources, this licencing structure seeks to guarantee operational fairness and provide equal playing fields for online and offline payment companies.

The goal of this action is to improve regulation in the offline payments industry. The people noted that regulated businesses that are presently involved in the point-of-sale (POS) industry, such as banks and non-banking financial corporations (NBFCs), would not be impacted. It is anticipated that third-party operators like as BharatPe, MSwipe, Paytm, and PineLabs would be impacted and will need a licence to continue with their business.

Taking Care of Market Dynamics
The paper said that the necessity for regulatory actions has risen due to third-party operators’ explosive expansion in the offline payments industry. It further said that banks have been known to employ third-party point-of-sale systems to make business easier.

In the internet domain, typical daily balances are ₹1,000 crore, whereas these operators handle ₹400 crore on a daily basis. Before the offline market “becomes too big,” one industry participant told the publication, legislative adjustments must be implemented.

such licences for payment aggregators, POS operators would need to fulfil certain requirements, such having a minimum net worth of ₹25 crore and adhering to RBI’s fit and suitable standards.

The report further said that the RBI did not reply to inquiries.

The information could not be independently verified by LiveMint.

Difficulties and Fears
Three major issues facing the industry are the reasons for the necessity for a licencing system. First, there has been an increase in credit card cash advances, which has resulted in big, one-time swipes at point-of-sale terminals. A POS business official told the newspaper that there are concerns over regulatory monitoring and know-your-customer (KYC) processes since there are indications that certain retailers may be giving cash in return for these transactions.

Second, there are security vulnerabilities due to differences in POS operators’ data storage procedures. According to a different industry executive, the necessity for standardisation and alignment with security measures is highlighted by the varying data retention durations, which may range from 90 days to over a year.

Thirdly, concerns exist about the administration of funds by other parties. According to one source, the possibility of unregulated businesses mismanaging money and the delay in merchant payments highlight the need for regulatory action to reduce possible hazards. It is concerning that no such instance has been discovered as of yet.

It is unclear at this time if companies like Paytm and BharatPe, which are seeking central bank permission for payment aggregator services, would be allowed to participate in the offline point of sale market if the planned licences become obligatory.