Fintech

RBI’s cross-border bet: Why payment aggregators are lining up for a licence

Sohini Mitter

September 23, 2024 | 12 Min Read

RBI wants to create a level playing field for banks and fintechs in cross-border B2B trade. SMEs, which have remained underserved by legacy banks, are now looking at fintechs for customised, cost-effective, and secure payments solutions as they get more entrenched in India's $750Bn export economy.

Key Takeaways

Fintechs are out to solve what banks have failed to by offering speed, transparency and cost efficiency to underserved SMEs, which account for a third of India's exports
While only four fintechs have secured the PA-CB licence so far, The CapTable has learnt from sources that at least 6-8 more are in line to receive RBI’s nod in a few months
Fintechs like Cashfree, which was the first to secure the licence, expect 15% of their revenues to come from PA-CB in two years
While the mood in the industry is positive and RBI's stance favourable, concerns are being raised about the long-term viability of PA-CB operators and their revenue models

India’s central bank has a new darling: cross-border fintechs.

Towards the end of July, the Reserve Bank of India (RBI) started doling out Payment Aggregator Cross-Border (PA-CB) licences to fintech companies. Bengaluru-based Cashfree Payments was the first to secure one, followed by Amazon Pay, Adyen (a Dutch payments major slated to launch in India soon), and BillDesk. All within the span of a week.

These entities, like any cross-border fintechs, facilitate online payments in multiple currencies across international territories and are compliant with the local jurisdictions and regulators of these countries. The PA-CB licence now enables them to extend their existing solutions to Indian exporters, small merchants, e-commerce sellers, freelancers, software service providers, legal counsels, accounting firms, digital marketers, and so on. These small businesses can now accept payments in multiple foreign currencies seamlessly. At the same time, global sellers and marketplaces can also accept payments locally in Indian rupees from customers here.

The RBI first invited PA-CB applications from non-bank payment aggregators in December 2023 and set April 30, 2024, as a deadline. Applicants were required to show Rs 15 crore in business net worth at the time of application, and Rs 25 crore net worth by March 31, 2026. Securing the licence would allow these fintechs to not only expand their businesses globally and tap into all-new customer segments but also make them a part of India's thriving export economy–worth $750 billion now and estimated to reach $2 trillion by 2030, according to data from the Ministry of Commerce.

The cross-border payments sector, meanwhile, is projected to reach $65 billion domestically by 2030, per an estimate from PwC.

Corporate

Access unlimited content at a special discounted rate. Trusted by top VC’s and leading organizations, we provide bulk subscriptions for groups of 30+. Contact us for more details

Campus

Top educational institutions have collaborated with us for campus-wide subscriptions. For bulk campus-wide access, please get in touch.

Join our community of 100,000+ top executives, VCs, entrepreneurs, and brightest student minds

Trusted by the best

Karthik Reddy

Blume Ventures

The CapTable brings a refreshing set of insights for us at the Blume team, highlighting stories that bring together the underlying business and founders with that of investors' journeys with these startups. It's an important perspective that very few bring to startup ecosystem enthusiasts.

Latest Articles

Why online brands need to take the Northeast shopper more seriously

Consumers in the Northeast are outpacing the rest of India in online spending, driven by high internet penetration, global cultural influences, and brand loyalty

Parvathi Benu

Groww’s $8 billion IPO puts fintech valuations to the test

India’s fintech unicorns are lining up for IPOs, but unlike Groww—which seemingly has grown into its valuation—many will face the hard reality of rerating unless they quickly prove their growth and profitability stories.

Nikhil Patwardhan

The overlooked barriers to India’s next ecommerce boom cycle

India has more online shoppers than almost any country but China. Quick commerce is its big win, but in the other two global waves reshaping ecommerce, it’s falling behind peers like Brazil and Indonesia.

Pranav Balakrishnan

India must build the electro-intelligence stack

Even as India turns its focus to the AI race, there's a growing opportunity to build for the electric stack—augmenting physical technologies like motors, pumps, and heat pumps with intelligence that makes them more efficient and responsive.

K Yatish Rajawat

Org Chart: Inside BigBasket’s C-Suite shuffles and tweaks for a quick commerce era

As BigBasket pivots to quick commerce, it has added leaders, built specialised teams, and freed founders to focus on strategy and fundraising. Yet even as it chases faster delivery and battles lost market share, it holds on to the cultural ethos built a decade ago.

Pranav Balakrishnan

Convinced that The Captable stories and insights
will give you the edge?

Convinced that The Captable stories
and insights will give you the edge?

Subscribe Now

Stories

Explore