The Reserve Bank of India has issued a surprising order to card networks such as Visa and Mastercard to stop card-based commercial payments made by corporations and small enterprises. Transactions at business outlets that are not authorized to accept card payments have been temporarily halted. The reason for this move is unclear, but industry sources suggest that the regulator may be concerned about money flow through the card route to non-KYC-ed merchants.
Although their bank accounts may be KYC-ed, these merchants are not typically authorized to accept card payments. Fintech startups that operate in this sector have been instructed to pause business payments made by commercial cards until further notice. This move will also impact rental and tuition payments. However, some fintechs are looking for ways to ensure that business payments are not disrupted.
Typically, companies make business payments through net banking or bulk transfers managed by the RBI, like RTGS. Card payments were not commonly used in this space until fintechs and card networks developed the process through which cards could pay business vendors.
Fintechs such as Enkash and Paymate process payments made through commercial cards for business needs, such as paying vendors and suppliers. It is believed that the instruction came from the regulator to card networks, who in turn informed the industry. Although the exact reason for the regulatory action is still unknown, some speculate that it could be related to the payment aggregator guidelines.
