Payment Gateways are mediator components between the banks and the websites supporting the delivery of transaction details. They put together information from the payer bank and pass on the information to the receiving banks. Payment gateway license is issued under the provisions of the Payment and Settlement System Act, 2007.
Overview of Payment Gateway License
Nowadays, we experience the ease and flexibility of online shopping, as we can make payments easily by various methods. Besides, we can easily make payments to our electricity, telephone, mobile bills, DTH recharge, etc. , with ease by the help of various payment methods. While online shopping, a person can choose various products, and they will be automatically in the cart, and at the time of making payments, the person uses ‘Payment Gateway’ of the shopping site, the payment gateway of the site must have obtained a Payment Gateway License.
The Payment gateway license is issued under the provisions of the Payment and Settlement System Act, 2007, and the Reserve Bank of India (RBI) is the regulating authority for the entities using Payment Gateway License.
Basic Requirements for obtaining Payment Gateway License
For obtaining a payment gateway license, an applicant has to fulfill the following basic requirements:
- A minimum of two directors and two members.
- The applicant company’s minimum net worth for obtaining payment gateway license is INR 15 crore, which must be increased to INR 25 crore within three years from its commencement.
- Registered office address details of the business.
- A detailed business plan and strategy for the next five years.
- PAN details of the business and the details of the current account in the name of the company.
- Code testing report and System flow by the certifying software organization.
- The process of payment gateway license will be subjected to the Reserve Bank of India’s discretion.
- For starting payment gateway business, the company’s service tax registration number must be obtained for that registration under the service tax is mandatory.
- Payment Card Industry Data Security Standard (PCI-DSS) to be associated with the payment gateway business in India.
PCI DSS intends to optimize the security of debit card, credit card, cash card transactions, and protect cardholders from any kind of fraud or scam. The primary focus of PCI DSS is to improve the security of payment accounts by processing the transaction to control the ongoing process of the payment card industry security standards. Payment Gateway License is software related compliance involved apart from authoritarian compliance, which is most tricky and needs appropriate attention.
How do Payment Gateways License Holders Operate?
Procedure to Obtain Payment Gateway License
An applicant has to follow the below-mentioned steps to obtain a payment gateway license in India.
- Step 1: As stated in section 5(1) of the Payment and Settlement System Act, 2007, the applicant has to apply the Form A. The application in Form A has to be submitted in the central office of the Reserve Bank of India at Mumbai to the Settlement Systems and Chief General of Department of Payment. It can also be submitted to such other administrative centers of the Reserve Bank of India as may be specified intermittently.
- Step 2: As per section 6 of the Payment and Settlement System Act, 2007, the Reserve Bank of India’s commendation for giving the approval is conditional to its discretion. The Reserve Bank of India has the authority to handle such inquiries as it may consider them important to satisfy the details’ legitimacy. The details must be submitted by the candidate and for examining the credentials of the concerned parties.
- Step 3: The Reserve Bank of India must take the following precise requirements into consideration before approving the authorization letter.
Requirements are as follows:
- Take into account all the necessity for the projected payment system and services suggested.
- Take into account the decisive technical factors set for the payment system or the projected payment system’s composition.
- Take into account all the necessary terms and conditions, as well as any security scheme, for the maintenance of the projected payment system.
- Take into account how the transfer is done in the given payment system;
- Take into account all the approach of the netting of payment supervision that affects the payment obligations under the payment system.
- The applicant has to take into account the sincerity and management’s financial status practice.
- Take into account the terms and condition that administer the relationship of the consumer with payment providers;
- Take into account the monetary and credit policies;
- Take into account the time frame for authorization.
- Step 4: The authorization certificate will be issued by filing Form B for carrying and commencing a payment system to the applicant only if the Reserve Bank of India is satisfied that all the necessary provisions stated in section 7(1) of the Payment and Settlement System Act, 2007 are fulfilled. As stated by the Reserve Bank of India, the approval shall take effect date, as per the state of affairs that have been imposed.
- Step 5: The Reserve Bank of India will process the application of authorization at the initial with a maximum time limit of six months, as per the provisions of section 4 of the Payment and Settlement System Act, 2007; it can be articulated from the date on which the application for approval has been filed.
Additional Functions of Payment Gateway Operators
The payment gateway registration allows other functions like:
- Identity morphing recognition;
- AVS ( Advanced Visual Systems) Checks;
- Computer Finger Printing Technology;
- Velocity pattern Analysis
- Verification of delivery address
- To authorize application transmitted to the processor for calculating the tax amount.
The Payment gateway license is issued under the provisions of the Payment and Settlement System Act, 2007, and the Reserve Bank of India (RBI) is the regulating authority for the entities using Payment Gateway License. Nowadays, we experience the ease and flexibility of online shopping, as we can make payments easily by various methods. Besides, we can easily make payments to our electricity, telephone, mobile bills, DTH recharge, etc.