Payment Aggregators, who are 3rd party payment service providers also known as merchant aggregators, are planning to approach the Reserve Bank of India (RBI), India’s central bank, regarding the latest digital lending standards that do away with mediators.
The function of payment aggregators in undertaking transactions has been abolished by the regulator, who has administered that every loan must travel straight from the regulated firms to the customer’s account. These standards endanger the business model and are being pushed for easing by the aggregators and their not-for-profit lobbying organization, the Fintech Association for Consumer Empowerment (FACE).
Every loan disbursement under the new digital lending standards will occur between the borrower’s bank account and organizations under the Reserve Bank of India’s regulation. No loan will be permitted to be passed through a 3rd party.
According to an official from a payment aggregator, they seek to understand where they stand in the new digital lending framework because the Reserve Bank of India has disregarded the function of payment aggregators and other intermediaries. They want to question the central bank as to the reason for their position being terminated.
According to a source associated with the payment system, Payment Aggregators, or merchant aggregators, are necessary as they are used to carry out all e-commerce activities. Introducing such regulations disturbs the successfully operating well-established business models. Payment Aggregators request permission from the Reserve Bank of India to handle these online transactions.
Presently, loans are not handed out immediately to the customer’s bank account for most digital lending and Buy Now Pay Later (BNPL) firms but rather to a nodal bank account. The money is sent straight to the retailer through payment aggregators. The regulations do not permit this method in the Reserve Bank of India’s present state.
No matter who the balance sheet or portfolio lender is, a few business models with multi-lender positioning use pooling and nodal accounts to give all borrowers the same reimbursement directive. These models may need to be modified, making operations more complex.