RBI asks Visa, Mastercard to stop business payments via commercial cards: Report
The Reserve Bank of India has reportedly asked card payment gateways like Mastercard and Visa to halt card-based commercial payments made by companies and small entities. Following this, the card networks have discontinued their services to all non-KYC-ed merchants and business outlets who might not be authorised to accept card payments until further notice, a report in the Economic Times said.
The report said that the exact reason behind the RBI’s recent step is still not known. However, industry sources said that the central bank is concerned about the flow of money through the card route toward non-KYC-ed merchants. While their bank accounts might be KYC-ed, but they are mostly not authorised to accept card payments as merchants.
The Visa’s notice to these enterprises reads: “We have been directed by the regulator to ensure that all Business Payment Service Provider (BPSP) transactions be kept in abeyance till further notice. Hence, we kindly ask that all BPSP merchants registered by yourselves with Visa be immediately suspended till advised by us to the contrary. For avoidance of doubt, any transaction authorised prior to the communication would be settled in the ordinary course of business. We kindly ask that you send us a confirmation at the earliest that such merchants/merchant IDs have been blocked and transactions ceased. Failure to adhere to these instructions could result in regulatory sanction and non-compliance assessment under the Visa rules.”
Mastercard hasn’t issued any statement yet.
“An instruction has come to the fintechs which operate in this sector to pause business payments made by commercial cards until further notice,” said a founder of a fintech startup told ET after receiving the notice.
The fintech founder said that rental and tuition payments might also be impacted by the move. Some fintechs are also looking to stop these transactions due to RBI’s recent instructions. Consumers can now make rental payments via their cards through apps like Cred, Paytm and NoBroker.
As a general practice, business payments are made by companies through net banking or bulk transfers like RTGS (Real Time Gross Settlements). Card payments are not commonly used in this space, until fintechs and card networks built the process through which business vendors could be paid by cards.
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