Stripe puts India comeback on indefinite hold

The payments firm, which received in-principle approval for a payment aggregator licence in 2022 and final authorisation to facilitate domestic transactions in January 2024, switched to an invite-only model requiring Indian merchants to join a waitlist later that year, after the Reserve Bank of India (RBI) proposed stricter know-your-customer (KYC) norms.

In a May 2024 post on its website, the company said it would support only a select set of Indian businesses focused on international expansion and aimed to onboard more users by the second half of 2025.

By July that year, the over-$100-billion multinational also surrendered the cross-border payment aggregator licence it had received just three months earlier, according to the three people mentioned above.

However, the San Francisco- and Dublin-headquartered firm’s plans to offer both business-to-business (B2B) and business-to-consumer (B2C) payments in India and compete with the likes of Razorpay, Cashfree, and PayU are now on hold.

“The company had been evaluating an expansion beyond cross-border payments offered to Indian merchants, and it onboarded UPI (Unified Payments Interface) as an option in 2024," said a payments executive on condition of anonymity. “But tighter rules for merchant onboarding by payment aggregators have spoiled Stripe’s plans to launch a full-stack payments platform here."

Meanwhile, Stripe reiterated its support for Indian users in its response to Mint’s queries. “We remain committed to supporting our users, including those wanting to expand globally or to reach customers in India."

India’s cross-border payments market has expanded rapidly due to services exports, software-as-a-service (SaaS), and global freelancing. This has drawn fintechs and payment aggregators that help small and medium enterprises invoice, collect, and reconcile overseas flows.

Key players include Skydo, XFlow, BriskPe and Razorpay, as well as banks and global payment service providers such as PayPal.

India set a new remittance record in 2024-25, receiving $135.46 billion, up 14% year-on-year, according to the latest RBI data. According to a recent industry report by global payments provider Worldline Global, these inflows now account for over a tenth of gross current account receipts.

RBI spanner in the works

The company's unique selling proposition has been instant merchant onboarding and the ability for businesses to start accepting payments on websites and apps almost immediately.

However, that model is no longer viable in India, as the banking regulator now requires payment aggregators to conduct full KYC for every merchant—even if the merchant has already completed the process with a bank.

In April 2024, the central bank released draft directions for payment aggregators and gateways, proposing changes to merchant due diligence norms, settlement practices, and the maintenance of escrow accounts. It also proposed tighter KYC requirements, triggering a sector-wide re-verification of merchant details—including bank accounts and business credentials—to ensure settlements flow only to the rightful, linked entity.

The regulator finalized a new framework by September 2025. Key directives include mandatory RBI authorization for non-bank payment aggregators by 31 December 2025, new capital requirements, and enhanced merchant due diligence, including KYC.

This emphasis on rigorous merchant KYC and document verification to weed out fictitious operators has increased compliance costs for aggregators, said a fintech founder on the condition of anonymity.

“The RBI has made it clear that all existing and new merchants onboarded by payment aggregators must undergo re‑KYC," the person said. “This is adding to compliance costs as each re‑KYC carries a per‑merchant expense that shows up directly in operating spend."

Besides, India’s data localization requirements and the Digital Personal Data Protection (DPDP) framework further expand compliance scope for global players, the person added.

Shashwat Sharma, senior partner and financial services lead at global management consulting firm Kearney, said the RBI tightened norms after a spate of misuse—fraudulent transactions, laundering risks, and flows routed to gambling and offshore lending apps—across the payment ecosystem.

The regulator wants more accountability from payments aggregators for verifying merchant identity, business legitimacy, and fund flows on an ongoing basis, he added.

Stripe's workaround

In the absence of a broad domestic rollout, Stripe is supporting a limited set of exporters through partner rails—licensed payment aggregators and banks onboard merchants and conduct full KYC, while Stripe integrates as a referral and technical layer.

This approach, sometimes described as a “merchant-on-record" or sub‑merchant model under the licensed entity, allows select Indian businesses to accept international card payments compliantly without Stripe acting as the primary onboarder.

“What Stripe is likely doing right now is partnering with a licensed aggregator or a bank that onboards the merchant, does the KYC, and treats Stripe as a referral or integration layer," said the fintech founder quoted earlier. “It’s not a loophole, and is an acceptable construct where the licensed entity is the merchant on record and Stripe’s merchants operate as sub‑merchants under that umbrella."

Stripe does offer an MOR model globally; however, this is not the model used in India. Stripe India processes cross-border/export transactions for Indian merchants as a licensed payment aggregator, a Stripe spokesperson told Mint.

However, Sharma of Kearney added that the stricter KYC wasn’t a paperwork exercise, it was a response to real risks. “When merchant‑on‑record constructs were abused, money found its way to gambling, offshore lending apps, and dubious operators. The RBI’s message was clear…aggregators are responsible for who they onboard and where the money goes, with full KYC and continuous monitoring baked in from day one."

Stripe, whose valuation reportedly climbed to $106.7 billion in September, saw its 2024 revenue rise 34% to $5.1 billion and posted a pre‑tax profit of $102 million, a sharp turnaround from a $1.2 billion loss a year earlier, according to a Forbes report.