RBI asks Visa, Mastercard to halt commercial card-based vendor payments
19 Feb 2024, 10:13 PMVisa has sent out a communication to its fintech partners asking them to stop Business Payment Service Provider (BPSP) transactions.
Arti Singh
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After Paytm Payments Bank and a set of lending companies, Reserve Bank of India has now come hard on fintechs offering commercial/corporate cards. According to three sources, RBI has asked Visa and Mastercard to stop transactions of vendor payments. While there has been no communication from Mastercard yet but Visa has sent out a communication to its fintech partners asking them to stop Business Payment Service Provider (BPSP) transactions.
The communication from Visa 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/merchant ids registered by yourselves with Visa be immediately suspended till advised by us to the contrary. For avoidance of doubt, any transaction authorized 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."
A senior official, whose fintech is directly impacted by this decision, said, "There's some miscommunication or misrepresention to RBI, otherwise there’s no reason they would be doing this. This is coming from a point of view that there’s quite a bit of transactions happening in the ecosystem in the name of tuition fee, rental payments and the likes of it...which is becoming too large to manage. RBI's concerns might be the source of the money and where it is going."
"It's a kneejerk reaction by the RBI. While we haven't got any official communication from RBI directly but what we have been told is that the RBI came to Visa and Mastercard and asked them to explain what is Business Payment Service Provider (BPSP) transactions. It is like either you come and explain this to us or stop these transactions."
Companies such as EnKash, Paymate among others operate in this segment. "Our huge part of business came from this. As per industry estimates, spends happening on commercial cards at one point was somewhere about Rs 25000 crore per month, out of which 20%-25% was for vendor payments," the official quoted above claimed.
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