RBI’s crackdown on BPSPs: Unraveling the recent disruption in commercial credit card transactions

The Reserve Bank of India made headlines by intensifying its scrutiny of select fintech companies. Notably, the RBI directed payment giants VISA and Mastercard to suspend credit card payments for specific institutions. The RBI pointed out that an undisclosed “Card Network” had engaged in arrangements not approved by the RBI.

To grasp the situation, it’s essential to comprehend the concept of a Business Payment Service Provider (BPSP). Imagine running an art business, requiring a steady supply of materials. Typically, a trusted supplier demands immediate cash payment, posing challenges for businesses with tight working capital.


In recent years, fintechs entered the scene, becoming BPSPs to disrupt traditional business transactions. They collaborated with banks to offer co-branded credit cards, utilizing established payment networks like Visa and Mastercard. This innovation allowed businesses to pay suppliers via credit cards, even if the suppliers lacked the infrastructure for such transactions.

This approach offered benefits to all parties involved. Businesses received extended credit periods, suppliers experienced faster payments, and banks facilitated swift transactions.

Several BPSP companies, such as PayMate, highlighted this feature prominently on their websites. However, recent developments indicate a setback for BPSPs. The RBI’s clarification instructed “the Card Network,” likely Visa, to halt commercial credit card transactions facilitated by BPSPs.

The RBI claims this practice lacks legal sanction, citing the absence of a license under the Payment and Settlement Systems Act of 2007. The issue also involves Know Your Customer (KYC) norms, potentially related to businesses using credit cards for non-merchant transactions, like paying rent to landlords.

While BPSPs argue they require licenses, the RBI’s unexpected move has left the industry uncertain about its future. As the story unfolds, we await further developments and hope for a temporary ban with prompt resolution of any regulatory concerns or loopholes.