Explained: The headlong rush for a payment aggregator licence

economictimes.indiatimes.com:

payment aggregator licences on Tuesday. The likes of Razorpay, Cashfree, Open Financial Technologies, Enkash, and Google Pay all made it to the list.

While recognition from the central bank is always a big deal for startups, for Cashfree and Razorpay it meant finally getting back to business. For a year or so, these startups were barred from onboarding new merchants by the central bank.

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Two other major payment players, Paytm and PayU, are still languishing under the embargo.

So, what does this payment aggregator licence mean? And why is it so significant for payment companies? ET explains.

First up, what is a payment aggregator?

A payment aggregator is an entity that works with online merchants and helps connect them with acquirers (mostly banks) to process digital payments.

Once a customer makes a payment while checking out from an ecommerce portal, a payment aggregator processes the transaction. At the end of the day or after a day, they collect all the payments made to the merchant and settle them directly into the merchant’s account.

Why is the RBI licensing these players?

Until recently, payment aggregators were not regulated by the RBI. They had to follow the tech service provider norms of banks. But over the last few years, as the internet ecosystem in the country boomed, many payment companies flouted basic rules of customer onboarding, KYC and background checks in the rush for market share.

Finally, in 2020, the central bank decided to step