Payment Intermediary by Card Network – Restraining of Unauthorized Payment System

Summary:

The Reserve Bank of India (RBI) has identified an arrangement between a Card Network and certain intermediaries that enables businesses to make card payments to non-card accepting entities. This arrangement, which involves pooling large amounts of funds and lacking originator and beneficiary information, has raised concerns regarding its legal compliance and compliance with know-your-customer (KYC) requirements. The RBI has observed that this arrangement constitutes a payment system that requires authorization under Section 4 of the Payment and Settlement Systems (PSS) Act, 2007, which has not been obtained. The RBI has advised the Card Network to keep all similar arrangements on hold until further orders, emphasizing that this decision does not restrict normal usage of business credit cards.