In common parlance, a Payment gateway is an online platform which facilitates acceptance of payments electronically through various available options like credit card, debit card , bank transfer and real-time bank transfer based on online banking.
The role of payment gateway in facilitation of payment acceptance online makes them an essential element of the e-commerce industry. These are growing and emerging along with the e-commerce industry. (Example: Paypal, Directpay, Alert pay, CCAvenue, PayUMoney etc.).
Payment gateways function by providing the secure, integral link between a website (web server) and the bank. When credit card/debit card details are submitted on a website, the payment gateway receives these details and sends them to the bank for verification. The bank then replies with a response; usually either accepted or declined. The payment gateway then sends this response back to the web server when the appropriate message is displayed to the user – for example “Your payment has been successful”
Most payment gateways function on Pan India model wherein they facilitate payment acceptance across the country, however there are few payment gateways which allow acceptance of payment across boundaries and facilitate cross-border transactions as well.
This article aims to highlight the importance of the services provided by the Online Payment Gateway Service Providers (OPGSPs), with respect to cross border/International transactions.
FUNCTIONING OF A PAYMENT GATEWAY
A payment gateway1 is an e-commerce application service provider that facilitates the transfer of information between a payment portal (such as a website, mobile phone or interactive voice response service) and the Back End Processor.
PROCESSING AND SETTLEMENT OF CROSS BORDER TRANSACTIONS
For facilitating cross border transactions, OPGSP has emerged as a successful service model for not only facilitating conclusion of the transaction but it also allows exporters to retain the export proceeds abroad without resulting in violation of the provisions of FEMA, 1999
Acknowledging the importance of the services provided by the OPGSPs to the exporters, the Reserve Bank of India (RBI) has issued stiff guidelines vide Circular No. 17 dated November 16, 2010 and decided to allow Authorised Dealers Category -1 banks to handle repatriation of export-related receipts by entering into standing arrangements with Online Payment Gateway Service Providers (OPGSP), subject to the following conditions:
ì. The AD Category-I banks offering this facility shall carry out the due diligence of the OPGSP.
ii. This facility shall only be available for export of goods and services of value not exceeding USD 500 (US Dollar five hundred).
iii. AD Category-I banks providing such facilities shall open a NOSTRO collection account for receipt of the export related payments facilitated through such arrangements.
Aforesaid facility shall only be available for export of goods and services of value not exceeding USD 500
The revised consolidated guidelines were issued by RBI in 2015 vide Circular No.16 dated September 24, 2015
The Reserve Bank of India decided to permit AD Category-l banks to offer similar facility of payment for imports as well of value not exceeding USD 2000 by entering into standing arrangements with the OPGSPs (earlier facility was available only for exports)
Also, the facility available for export of goods and services of value not exceeding USD 500 has been revised from USD 500 (US Dollar five hundred) to USD 10,000 (US Dollar ten thousand)
OPGSPs: A boon for Start-ups
Start-ups are now permitted to avail of the facility for realising the receivables of its overseas subsidiary or making the above repatriation through OPGSPs for value not exceeding USD 10,000
Reserve Bank of India vide Press Release dated February 2, 2016, had clarified issues relating to start-ups for accepting payment on behalf of overseas subsidiaries
In this connection, it is clarified that a start-up in India with an overseas subsidiary is now permitted to open foreign currency account abroad to pool the foreign exchange earnings out of the exports/sales and the balances in the said foreign currency account should be repatriated to India within a period of nine months.
To sum up, recent amendments by Reserve bank of India clearly points out the transitions from traditional ways of doing business to innovative platforms like online payment gateways which now has emerged as a popular mode of facilitating export and import transactions globally.
CRUX OF MONETARY LIMITS