RBI is preparing to introduce a licensing framework for point-of-sale (POS) operators, which would bring companies like Rogerpay, Cashfree, Pine Labs, and MSwipe under the purview of regulation. The objective is to promote transparency and accountability in the payment ecosystem.
The Reserve Bank of India’s move to introduce a licensing framework for POS operators is expected to significantly impact major players such as Pine Labs, MSwipe, Paytm, and BharatPe. Following regulatory action against Paytm Payment Bank, the RBI is likely to adopt a strict stance on POS payment players. Companies like Rogerpay, Cashfree, Pine Labs, and MSwipe could fall under the oversight of the regulator. The RBI aims to enhance transparency in POS services to prevent customer fraud.
The draft framework also encompasses the physical POS activities of payment aggregators (PAs). Companies providing such services will be required to apply for authorization from the RBI by May 31, 2025. Failure to obtain authorization would result in the cessation of these services, as per the draft rules.
According to sources, regulated institutions like banks and non-banking financial companies (NBFCs) currently engaged in POS business will not be affected. However, third-party operators like BharatPe, MSwipe, Paytm, and PineLabs are expected to be impacted and will need licenses to continue operations.
The rapid growth of third-party operators in the offline payments sector has prompted the need for regulatory measures. Banks are also leveraging third-party POS for business convenience. These operators manage a daily average balance of Rs 400 crore, compared to Rs 1,000 crore in the online sector.
POS operators may need to meet certain criteria, including a minimum net worth of ₹25 crore and compliance with other RBI conditions, similar to a payment aggregator license. The RBI did not respond to queries regarding these developments.
The need for a licensing framework arises from three major concerns within the industry. Firstly, there has been an increase in cash credit on credit cards, leading to significant one-time swipes at POS terminals. Some merchants are suspected of offering cash in exchange for these transactions, raising questions about KYC processes and regulatory oversight.
Payment aggregators classified as merchants must inform the regulator about their intention to obtain authorization within 60 days from the date of formal guidelines. Banks must close non-bank PA-Ps by October 31, 2025, unless evidence of applying to RBI for authorization is provided.
Enhanced customer due diligence is suggested by the regulator to ensure that the right group of merchants can avail digital payment services. All PAs must become members of the Financial Intelligence Unit under the Finance Ministry to report any suspicious transactions. These guidelines apply equally to PA-Ps and Online Payment Aggregators (PA-Os), with KYC rules becoming applicable three months from the issuance of the circular.
Existing PA merchants must also adhere to KYC rules by September 2025. These guidelines are crucial given the RBI’s scrutiny of the digital payments ecosystem and the level of KYC carried out by service providers on their merchants. Paytm Payments Bank recently faced regulatory action due to improper KYC of its user base. The central bank has suggested classifying merchants into small and medium categories for ease of payment player operations.