India Cracks Down on Consumer Lending; Razorpay and Pine Labs Score Payment Licenses

This week’s edition of Finovate Global takes a look at recent developments in the fintech industry in India.

Has a “fintech reckoning” come to India? That’s the take shared by the Wall Street Journal recently, which suggested that many of the country’s fintech startups are facing new regulatory scrutiny. TechCrunch joined the alarm, looking specifically at the decision by the Reserve Bank of India to ban the practice of using credit cards to load and top up non-bank prepaid payment instruments (PPIs) such as prepaid cards.

The potential impact of the ruling is broad, with companies that specifically leverage PPI licenses to issue cards and then offer cardholders lines of credit, as well as Buy Now, Pay Later firms, that also use a similar approach to offer loans to consumers, being affected. The former group includes major Indian fintechs such as Slice, OneCard, Jupiter, Uni, and KreditBee.

The decision has drawn criticism from individuals in those businesses, some of whom have spoken to the press only on condition of anonymity to “avoid upsetting RBI officials” as TechCrunch described it. Some of those speaking against the policy have accused the RBI of issuing a ruling that is “very confusing and strange.” Others have hinted that lobbying from banks has played a role and reflects a common practice of incumbents using the system to stymie new entrants and slow innovation.

In fact, one option some of the potentially impacted companies may pursue – moving to PPIs through banks and offering their services inline with RBI guidelines –could actually bolster the position of the banks relative to fintechs.

“Not allowing loading of prepaid instruments through credit is aimed at protecting bank’s lazy credit card business from fintech’s potent BNPL business,” BharatPe co-founder Ashneer Grover tweeted after RBI’s decision was announced. “It’s a flex move by banks – rent seeking.”

In other fintech news from India, we learned this week that Razorpay and Pine Labs both secured approval from the RBI for payment aggregator licenses. The firms are among the first to receive the approvals, which come as the central bank prepares a list of fintechs that will be allowed to operate as payment aggregators in the country. Reportedly more than 185 fintechs have applied for the authorization, which requires companies to have a net worth of $1.9 million as of FY 2021 and a net worth of $3.1 million by the end of FY 2023.

Established in 2020, India’s payment aggregator framework enables only RBI-approved firms to offer payment services to merchants. Among the companies to have applied are major fintechs such as PayU, BharatPe, and FSS, as well as technology companies Google and Amazon.

Founded in 2013, Razorpay is a payment gateway that seeks to improve money management for online businesses by offering clean, developer-friendly APIs and easy integration. With more than 300 million end customers, Razorpay has raised more than $816 million in funding. Harshil Mathur is co-founder and CEO.

Pine Labs is an omnichannel merchant commerce platform that serves businesses in India and Southeast Asia. The company’s solutions offer frictionless online payments for businesses, provide closed-loop gift cards for businesses to boost customer acquisition, and a smart payment app. Founded in 1998, Pine Labs has raised $1.2 billion in funding. Amrish Rau is CEO.

Here is our look at fintech innovation around the world.

Middle East and Northern Africa

Central and Southern Asia

Latin America and the Caribbean


Sub-Saharan Africa

Central and Eastern Europe

Photo by ritesh arya