RBI Directs Visa and Mastercard to Halt Commercial Card Payments: Compliance Concerns

The Reserve Bank of India (RBI) has instructed Visa and Mastercard to cease card-based commercial payments by businesses, citing concerns over Know Your Customer (KYC) compliance. This directive extends to transactions made by both small and large enterprises, with a focus on ensuring adherence to regulatory norms.

Regulatory Intervention and Industry Response

• RBI’s directive follows regulatory actions against Paytm Payments Bank and concerns over KYC non-compliance.
• Visa has acknowledged receiving communication from the RBI on February 8, indicating a broader industry request for information regarding the role of Business Payment Solution Providers (BPSPs) in commercial payments.
• Mastercard’s response to the directive is pending.

Impact on Business Payment Ecosystem

• Transactions made at unauthorized business outlets are to be temporarily halted, affecting various sectors relying on commercial card payments.
• Fintech companies, including Cred, Paytm, and Nobroker, which facilitate rental and tuition fee payments through commercial cards, are likely to be impacted.
• The suspension of this facility may also affect essential business operations such as vendor and supplier payments.

Industry Engagement and Compliance Efforts

• Visa asserts proactive engagement with the RBI and ecosystem partners to ensure compliance with regulations.
• Fintech players such as Enkash and Paymate, which process business payments through commercial cards, are also subject to the RBI’s directive.