RBI forbids fintechs from providing business credit cards due to concerns about KYC
MUMBAI: The RBI has requested that payment networks Visa and Mastercard cease assisting fintech aggregators, commonly referred to as business payment solution providers, with business credit card concerns.
In contrast to consumer credit cards, corporate credit cards are given to companies. These serve as a stand-in for operating capital for the businesses and are used to pay vendors.
These cards have traditionally been provided to corporations by banks. Fintechs have started issuing these cards in recent years, onboarding suppliers to allow them to take credit card network payments.
Visa verified the development when contacted. “On Thursday, February 8, Visa received a message from RBI about what seems to be a request for information from the industry on the function of BPSPs in business and commercial payments. The business released a statement saying, “That communication contained the directive that we hold all BPSP transactions in abeyance.”
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It is essential to remember that BPSPs are subject to RBI regulation and licensing in accordance with payment aggregator/payment gateway policies. In order to assure compliance, Visa is actively involved and keeps in communication with RBI and our ecosystem partners,” the statement said.
According to banks, the RBI was concerned since the cards were being issued by organizations that aren’t authorized to do so. Second, the use of company credit cards must be restricted to certain types of purchases. The central bank was also concerned that these instruments may circumvent KYC regulations if they were issued by non-banks to enable payments to retailers who haven’t been formally added to the card acceptance network.
According to a senior banker, there won’t be much of an effect on the credit card industry since aggregator share is so small. He said that small enterprises would not be negatively harmed since they could still get bank credit lines and utilize them for operating capital.
