RBI bars fintechs from issuing biz credit cards on KYC worries

RBI has asked payment networks Visa and Mastercard to stop facilitating business credit card issues by fintech aggregators, also known as business payment solution providers.

Business credit cards, unlike consumer credit cards, are issued to businesses. These are used to make vendor payments and act as a substitute for working capital for the companies.

Historically, banks have been issuing these cards to corporates. In recent years, fintechs have issued such cards, onboarding vendors to enable them to accept payments made on credit card networks.

When contacted, Visa confirmed the development. “Visa received a communication from RBI, Feb 8 in what appears to be an industry-wide request for information on the role of BPSPs in commercial and business payments. That communication included the direction that we hold all BPSP transactions in abeyance,” the company said in a statement.

“It is important to note that BPSPs are regulated and licensed by RBI under the payment aggregator/payment gateway guidelines. Visa is proactively engaged and continues to be in discussions with RBI and our ecosystem partners to ensure compliance,” the statement added.

Banks said that RBI’s concerns stemmed from the fact that the issuance was happening through entities that are not authorised to issue cards. Secondly, business credit cards must limit their usage for specified transactions. The central bank was also worried that these instruments, if issued by non-banks to facilitate payments to those merchants not officially onboarded to the card acceptance network, could bypass KYC norms.