CRED, the Indian fintech giant, has received provisional approval for a payment aggregator license, marking a significant milestone for the Bengaluru-based startup. This development, valued at $6.4 billion, is poised to enhance CRED’s ability to serve its customers, introduce innovative products, and expedite experimentation with new ideas.

According to sources familiar with the matter, the Reserve Bank of India (RBI) granted CRED provisional approval for the payment aggregator license earlier this week. Despite attempts to reach out, CRED has not yet responded to requests for comment.

Over the past year, the RBI has granted provisional approval for payment aggregator licenses to several companies, including Reliance Payment and Pine Labs. Typically, the central bank takes between nine months to a year to issue full approval following the provisional nod.

Payment aggregators play a crucial role in facilitating online transactions by bridging the gap between merchants and customers. The RBI’s approval empowers fintech firms like CRED to broaden their service offerings and enhance their competitiveness in the market.

Without a license, fintech startups often rely on third-party payment processors to handle transactions, which may not align with their priorities. Acquiring a license allows these companies to process payments directly, reducing costs, gaining more control over payment flow, and enabling direct onboarding of merchants. Moreover, licensed payment aggregators can settle funds directly with merchants.

This approval opens doors for CRED to expand its presence to more merchants and reach customers across various platforms, as noted by an industry executive.

This development comes amidst the RBI’s increased scrutiny of fintech practices and a cautious approach towards licensing. Notably, earlier this year, the RBI directed Paytm Payments Bank to suspend most of its operations.

Backed by prominent investors such as Tiger Global, Coatue, Peak XV, Sofina, Ribbit Capital, and Dragoneer, CRED serves a significant portion of India’s affluent clientele. Originally launched six years ago to assist members in timely credit card bill payments, CRED has since diversified its offerings to include loans and various other financial products. In February, it announced an agreement to acquire Kuvera, a mutual fund and stock investment platform, further expanding its portfolio.

Source: techcrunch.com

Despite the applause from FinTech leaders and industry associations for the open banking update in Tuesday’s federal budget, key questions linger regarding its implementation and timeline.

The government revealed that the Financial Consumer Agency of Canada (FCAC) will oversee the new system, with plans to introduce legislation in spring 2024 to expand the agency’s mandate. This legislation will include framework elements addressing the system’s scope and technical standard, with additional elements expected in a second piece of legislation in the fall.

However, a concrete launch date for the operationalization of the system for Canadians was not provided, although the government previously targeted 2025. This lack of clarity leaves uncertainties about the timeline within the FinTech community.

The envisioned consumer-directed finance system aims to enable Canadians to securely share their financial data with third parties, such as FinTech companies, facilitating easier switching between financial institutions. Presently, financial data sharing often relies on insecure methods like screen-scraping, posing risks to consumer privacy and potentially violating bank terms of service.

Alex Vronces, executive director of Fintechs Canada, described the announcement as the most substantial update the sector has received since discussions around open banking began. He noted the government’s recognition of consumer-directed finance as a tool to address affordability issues by fostering competition in the financial sector, as evident from its placement within the budget.

However, the absence of an update on a specific go-live date raised concerns for Vronces and others in the industry. While acknowledging the government’s commitment, Vronces emphasized the need for clarity to avoid uncertainty within the sector.

Vronces highlighted a significant shift in government attitude towards FinTech in the latter part of 2023, attributed to various factors including industry campaigns, international developments, and domestic economic priorities. This shift underscores the growing importance of open banking in Canada’s financial landscape.

Source: betakit.com