Bengaluru - Visa and Mastercard have halted card-based commercial payments for corporations and small enterprises following instructions from the Reserve Bank of India (RBI), surprising the industry.
Industry sources suggest that the regulator's concern lies with the flow of money through card transactions to merchants without Know Your Customer (KYC) verification. Transactions at unauthorized business outlets accepting card payments have been temporarily suspended.
Although the exact reason for the directive remains undisclosed, it's believed that the regulator is concerned about funds being channeled to non-KYC-compliant merchants through card transactions, despite their bank accounts being KYC-compliant.
A fintech startup founder, speaking anonymously, confirmed receiving the instruction to pause business payments via commercial cards until further notice.
The move could impact rental and tuition payments made through cards, with fintechs exploring options to halt such transactions. Rental payments through apps like Cred, Paytm, and NoBroker might be affected.
Queries to Visa and Mastercard remained unanswered as of now, according to Economic Times.
Traditionally, business payments are made through net banking or RBI-managed bulk transfers like RTGS, with card payments uncommon in this space. Fintechs like Enkash and Paymate facilitate business payments through commercial cards for vendor and supplier payments.
Ajay Adiseshann, CEO of Paymate, informed that the regulator's instruction prompted them to pause business payments through cards, ensuring compliance while exploring alternative solutions.
While the reason behind the regulatory action remains unclear, some speculate it could be related to payment aggregator guidelines or unauthorized card usage for consumer payments like tuition fees and rentals.
Fintech founders impacted by the move are prepared to comply with the regulator's directives and are halting all payments through this channel until further clarity is provided. They assert their intention to cooperate with regulatory requirements and avoid any potential compliance issues.