Newer stringent KYC rules could impact merchant onboarding, slowing digital payment momentum.
Vijay Balakrishnan
Independent Director| Board Member | C- Level Executive | Thought Leader | Marketing Transformation | Change Management | Ex Tata Consumer Products, Tata Tetley, Airtel, Docomo, Ujjivan and Cambridge International
After the PayTM compliance infringements, the RBI has prepared a draft norm around stricter Know Your Customer (KYC) rules for payment aggregators.
The draft specifies that these rules will also apply to existing players across leading online payment platforms like Razorpay, PayU, and Cashfree, card payment companies MSwipe and PineLabs, and QR code deployers like Google Pay, PhonePe, and BharatPe.
Why is this an issue?
Bank-grade KYC, which is fully compliant with RBI’s gold standards, can cost almost Rs 500 or upwards, and there are over 10 lakh existing merchants active, which means this exercise could cost upwards of Rs 50 crores or USD 6 million. The operational time of onboarding and live activation will also be impacted and could run into days that are in hours right now.
Given that early adopters are already in play, the second and third tranches of merchants waiting to adopt digital payments might find these asks and documentation quite vexing, irritating, and intimidating.
This might make them say no to digital payments, impacting momentum and growth in the universe.
The RBI has also recommended stopping the direct settlement of funds from the merchant escrow account to vendors. This will impact the business flows of very small merchants and further create friction in the system.
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