Razorpay, a platform for B2B banking and payments, said in a statement on Monday that the Reserve Bank of India (RBI) has granted the company an in-principle approval for a license to operate as a payment aggregator (PA).

The deadline for applications to be submitted for authorisation by non-bank businesses providing PA services was originally set for June 30, 2021, but it was later pushed to September 30, 2021 by the RBI.

More than 185 fintech businesses and startups submitted their applications for a license to operate a payment aggregator as part of the regulator’s stringent screening procedure. The few companies that have been granted permission to function as payment aggregators in India would be directly under the purview of the RBI.

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What is this license?

A number of mediators, including payment gateways and payment aggregators, facilitate payments in the online world. These middlemen serve as a link between those looking for goods and services and the merchants who supply them. These intermediaries' function is essential for a successful internet experience.

The RBI had released a payment aggregator framework in March 2020 stating that payment gateways will be required to obtain a license in order to acquire merchants and offer them digital payment acceptance solutions. This was done to safeguard the welfare of both consumers and businesses.

The regulations made it necessary for all payment gateways (PGs), including Razorpay, CCAvenue, Stripe, BillDesk and Cashfree, among others, to obtain a license in order to continue operating.

Many competitors, including PhonePe, BharatPe, Cred, Tata Group, Amazon, Reliance Industries, and Zomato, submitted licensing applications.

Without the licence, e-commerce companies and other participants would be forced to rely on a PA or form a partnership with a bank that could aggregate payments on their behalf, both of which would increase expenses and increase the amount of business for these licenced firms.

Who all have got it so far?

Along with American payments company Stripe, Pine Labs, and Razorpay, fintech startup 1Pay Mobileware announced that it received in-principle permission from RBI for the licence.

The list of players who have been granted licence approval in principle has not yet been made public by RBI.

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(Edited by : Anand Singha)