Razorpay founders Shashank Kumar and Harshil Mathur
Fintech unicorn Razorpay, one of the country’s leading payment gateways, has paused onboarding of new online merchants to comply with a communication that it received from the Reserve Bank of India, sources told Moneycontrol.
One of the sources cited above said the RBI has advised Razorpay to pause onboarding beginning December 15, 2022, until it can comply with a few guidelines required to obtain a final payment aggregator (PA) license.
While media reports claim that other platforms, such as Cashfree and Stripe, have also been advised to stop onboarding new online merchants, Stripe has said that the platform is continuing its services
“We haven’t received any communications from the RBI asking us to pause onboarding. We look forward to continuing to operate in India and help Indian businesses process their payments, support their subscription business models, and combat fraud,” said a Stripe spokesperson.
Cashfree could not be reached for an official comment.
In July, Pine Labs, Razorpay and American payments player Stripe became the first players to receive the in-principle approval for the PA license.
In a mail sent to these companies, RBI said that an in-principle approval has been granted and the companies will have to conduct an audit within the next six months to get a final nod, in line with RBI's procedure for all licenses.
“Our Plural Payment gateway continues to remain compliant as per the PA /PG guidelines and we are continuing to onboard online merchants. We processed nearly $10 billion of online volumes in November,” said the spokesperson from Pine Labs when asked about the developments.
“Every player has to submit a systematic audit report to get the full license. One of the changes is to convert from a nodal account to an escrow account, apart from other systematic upgrades,” a source said.
A Razorpay spokesperson confirmed the development to Moneycontrol.
"As part of the process for the final authorisation of our PA/PG license for which we received the in-principle approval from RBI in July, we are now required to share additional details with RBI to aid in the final license process. As part of this process, RBI has suggested us to temporarily withhold onboarding new online merchants till such details are submitted. As a responsible corporate that operates under the ambit of RBI, Razorpay has abided by the regulatory requirement," the statement said.
The spokesperson further added, "We would like to emphasize that this suggestion of RBI has no impact on Razorpay’s existing business operations and current merchants. Also, we continue to onboard new businesses on other Razorpay services - RazorpayX, Corporate Card, and Offline payments via Ezetap. Razorpay's operations are fully compliant with all regulatory guidelines and the company continues to be in touch with RBI for the next steps."
Razorpay currently has approximately eight million merchants on its platform and a weekly sign-up rate of 400-500.
According to sources, there may not be a material impact on its core business and revenue for the current fiscal year.
“This should not take more than a couple of weeks to resolve and will not have a major impact,” the person said.
According to industry sources Moneycontrol spoke with, this could be a minor setback for Razorpay because the company was competing with a slew of existing players like PayU as well as new players.
In fact, the number of payment gateway operators competing for a piece of the payment service offerings to large businesses is growing.
Pine Labs, the leader in point of sale (PoS) payments, launched its own payment gateway Plural last year and also acquired Mumbai-based online payments startup Qfix.
