PAYMENT GATEWAY SPACE

BE/RBI NOTE/07/2019

An Interest rate cut by Reserve Bank of India is expected to fast-track the country’s economic activity.  This, in turn, would bring more stability to the digital payments ecosystem and also make it more secure.

RBI is expected to address the hopes of many industries, which include:

1. Issues around merchant discount rates (fees that business pay for accepting business payments)
2. Grievance redressal for failed transactions
3. Distinction of types of payment gateway entities.

KEY POINTS:

• RBI’s Policy Statement reads that it is examining the feasibility of regulating the payment gateway space and would be releasing a consultation paper soon.
• The digital payments space has attracted a large number of players in the last few years.
• Hence it is felt that a regulatory mechanism has to be put in place which could ensure serious players with sound standing are retained.
• As of now there is only self-regulation system in the industry at present which is mostly set by the partner banks and there is no uniformity in the rules laid down and a policy statement by RBI would streamline the guidelines and procedures.

Following are few payment gateway companies

1. Bildesk
2. Ingenico epayments
3. PayU India
4. Razorpay
5. Airpay

ISSUES AND REDRESSAL:

• These companies do not have consumer used applications like Paytm or PhonePe.
• Here the consumers punch in their card details while making online purchases.
• Also, they help in settling banks’ funds
• Nodal account structure would ensure that the merchants’ funds are kept safe even in the event of the gateway entity collapses.
• RBI was in favour of players bringing innovations in the retail payments space which has resulted in multiple firms coming up.
• This has helped in connecting to large number of small merchants who would not have had the privilege of being served by big merchants.
• At present, many payment firms are just bringing technology layer over the gateway entity and settlements are not being made through nodal bank account.
• This means in case a transaction fails, there was a possibility of the merchant being subjected to the risk of losing money.

CONCLUSION:

Grievance Redressal Mechanism is said to be of great importance in the payment gateway space indeed which is expected to bring many changes in the coming days.