A year after RBI notified PA-CB norms, only four entities receive licence
Mumbai, Nov 27, 2024
PAs-CB are entities that enable cross-border payment transactions for import and export
Over a year after the Reserve Bank of India (RBI) introduced guidelines to regulate cross-border payment aggregators (PAs-CB), only four entities—Cashfree Payments, Amazon Pay, BillDesk, and Adyen India—have received licences to operate in this highly regulated space. This is in stark contrast to the 41 players approved to operate as domestic online payment aggregators (PAs).
The limited number of players ensures higher margins on cross-border payments, increasing the interest in offering these services. Obtaining a licence in this space requires rigorous compliance with regulations, including the Foreign Exchange Management Act (FEMA), an obligation not required for domestic PAs.
“Cross-border PA is a complex process. There are nuances that go beyond those of a domestic PA since the risks and consequences are higher because money is being moved between countries,” said Reeju Datta, co-founder of Cashfree Payments.
The Bengaluru-based payments firm was the first company to receive the PA-CB licence in July this year, with approval to operate in the import and export space.
PAs-CB are entities that facilitate cross-border payment transactions for the import and export of permissible goods and services through online platforms, according to the RBI.
Entities holding an online PA licence are likely to have an advantage when applying for the PA-CB licence, owing to the compliance measures undertaken during the initial licensing process for domestic PAs.
“By virtue of being a domestic PA, the checks and rigor one goes through make the process easier when applying for a PA-CB licence. If you already have the online PA licence, chances are you have the systems and processes in place to qualify for a PA-CB,” Datta added.
Meanwhile, other firms in the business-to-business (B2B) cross-border payments space, which are yet to receive the licence, continue to operate under regulations allowing them to do so, provided they applied before April 2024.
“The new regulation for PAs-CB was non-disruptive to existing players, meaning anyone operating under the right guidelines as of the day the licence was announced could continue, provided they applied for one. For instance, companies operating as Online Payment Gateway Service Providers (OPGSPs), like us, could continue operations,” said Movin Jain, co-founder of Skydo, a B2B international payments company.
Skydo applied for the PA-CB licence in March and is awaiting final approval from the regulator.
Unlike domestic PAs, PAs-CB are required to maintain separate import collection accounts (ICAs) and export collection accounts (ECAs). Domestic PAs involved in the PA-CB business must maintain escrow accounts separately from ECAs and ICAs.
Players noted that not every domestic bank is willing to offer account services for the PA-CB space due to the required infrastructure and limited interest in this area. This compels fintech companies to rely on specialised global banks to maintain ECAs or ICAs, often leading to a premium on services.
“There is a significant cost to being regulated and compliant, but it is natural for all businesses to adopt these practices eventually. Compliance in cross-border payments is harder and costlier. For example, we conduct video-based Know Your Customer (KYC) processes for every merchant,” Jain added.
A PA-CB export licence allows exporters to collect payments online from overseas customers, while a PA-CB import licence enables businesses outside India to collect payments from individuals here.
Pointers:
Only four entities have received PA-CB licence to date
Names include Cashfree Payments, Amazon Pay, Adyen, BillDesk
PAs-CB are entities that enable cross-border payment transactions for import and export
Licence requires additional regulatory rigour to operate in the space
[The Business Standard]
