Global: Reserve Bank of India Penalizes Visa for Unauthorized Payment Authentication Solution

The Reserve Bank of India (RBI) announced on Friday (July 26) that it has fined Visa Worldwide Pte. Limited for implementing a payment authentication solution without the necessary regulatory approval.

“It was observed that the entity had implemented a payment authentication solution without regulatory clearance from RBI,” stated the central bank in a Friday press release.

The fine amounts to 24.1 million rupees (approximately $288,000), according to the release.

The RBI did not elaborate on the specific details of the transgression, Reuters reported on Friday.

This penalty reflects the RBI’s increasing scrutiny of the procedures followed by FinTech companies in the country.

In a related move earlier this year, the RBI announced in March that it was directing Indian banks to cease exclusive agreements with credit card networks. The central bank concluded that such partnerships often do not provide consumers with adequate choice.

According to the new guidelines, banks must now offer customers the option to choose from multiple card networks when issuing new cards. Existing cardholders can select their preferred networks upon renewal. However, this rule does not apply to card issuers with fewer than 1 million active cards or those with their own authorized card networks.

A spokesperson for Mastercard expressed support for the RBI’s efforts to enhance choice for cardholders.

In February, Visa and Mastercard were reported to have paused intermediated commercial card payments in India following an RBI directive. The central bank instructed the companies to halt domestic transactions for business payment solution providers (BPSPs).

“Visa received a communication from the RBI on February 8, in what appears to be an industry-wide request for information on the role of business payment solution providers (BPSPs) in commercial and business payments,” a Visa India spokesperson told Reuters at the time.

In May, PayU, a digital financial services provider, announced it had received in-principle authorization from the RBI to operate as a payments aggregator. This approval allows PayU to start onboarding new merchants to its platform.

PayU Payments provides digital payment solutions tailored for the Indian market, serving eCommerce brands, banks, and consumers.