RBI Tightens Grip, Orders Visa to Halt Unauthorized B2B Card Payments

RBI Tightens Grip, Orders Visa to Halt Unauthorized B2B Card Payments

Feb 15 Travel Standard

The Indian financial landscape witnessed a significant development on Thursday as the Reserve Bank of India (RBI) clamped down on Visa, ordering them to halt unauthorized business-to-business (B2B) card payments processed through third-party intermediaries. This move follows closely on the heels of the RBI's shutdown of Paytm's banking unit just two weeks ago, citing "supervisory concerns."

The central bank's action stems from concerns about transparency and potential misuse of funds in these layered B2B transactions. These transactions involve large sums of money being pooled into intermediary accounts before reaching the intended recipient, raising concerns about traceability and compliance with Know Your Customer (KYC) regulations. The RBI expressed its reservations in a statement, highlighting that such activity was "without legal sanction" and raised concerns about large amounts of funds being pooled and inadequate information on the ultimate recipients.

While the financial impact on Visa's India business remains unclear, this order could potentially disrupt its B2B payment operations and force them to review their existing partnerships with third-party intermediaries. As per industry estimates, the B2B card payment market in India is expected to witness significant growth in the coming years, making this incident particularly impactful for Visa's future plans within the Indian market.

This move by the RBI signifies its increased scrutiny of the rapidly evolving fintech sector, emphasizing its commitment to ensuring regulatory compliance and protecting consumers. It sends a strong message to all players in the fintech space that adherence to regulations and transparency in operations is paramount. While innovation is crucial for the sector's growth, it must be balanced with ensuring the financial system's integrity and safeguarding consumer interests. As Visa responds to the RBI's directive and the central bank continues its scrutiny of the fintech sector, this story serves as a crucial reminder of the importance of compliance and transparency in the fast-paced world of digital payments.


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