RBI Directs Visa and MasterCard to Halt Card-Based Commercial Payments
- 15 Feb 2024
On 14th February, 2024, the Reserve Bank of India (RBI) has instructed card networks Visa and MasterCard to cease card-based commercial payments through payment service providers and companies.
Key Points
- Reasons for Directive: While the RBI has not officially disclosed the reasons behind the directive, it is believed that such transactions are being conducted at unauthorized outlets.
- Fintech companies are reportedly facilitating card payments for activities like tuition fees and rentals, despite lacking authorization to accept such payments. This potentially violates the Payment and Settlement Systems Act, 2007.
- Suspension of Transactions: Visa has communicated to fintech firms to suspend all transactions conducted through Business Payment Service Providers (BPSP) until further notice.
- Failure to comply with these instructions could result in regulatory sanctions and non-compliance assessments under Visa rules.
- Regulatory Compliance and KYC Requirements: The RBI's directive aims to ensure that fintech players and service providers operate within the regulatory framework and prevent fraudulent or unauthorized transactions in the digital space.
- The focus on Know Your Customer (KYC) compliance suggests concerns regarding identity verification and regulatory oversight.
- Impact of RBI's Actions: This move comes in the wake of the RBI's decision to bar Paytm from offering its core services due to various KYC and other issues.
- The regulatory scrutiny underscores the importance of adhering to compliance standards and maintaining integrity in digital transactions.
