IRCTC Aiming for Payment Aggregator License Approval: What Does This Mean?
IRCTC on Track for Payment Aggregator Venture; Anticipated RBI Approval in Approximately Three Months.
Stepping into the digital payment world, IRCTC, the catering and tourism arm of Indian Railways, is shooting for a payment aggregator license from the Reserve Bank of India (RBI). Expecting an affirmative nod in two to three months, the company hopes for final approval within a year post Q4 FY25 results.
Revenue Boost on the Horizon?
If greenlit, this license would pave the way for new revenue streams for IRCTC, as they take on the role of an intermediary for merchant-customer transactions, smoothing over the payment process. The company aims to capitalize on government institutions and railway-related transactions, initially focusing within the railways ecosystem to maximize scale advantages [1].
Payment aggregation can be a profitable endeavor, leaning heavily on substantial volumes to turn a profit, but with thin net take rates.
Building the Fintech Empire
To kickstart its foray into the fintech realm, IRCTC has taken steps like forming a subsidiary - IRCTC Payments - last year to bolster its payment vertical, aimed at growing into a technologically-driven fintech powerhouse, offering payment aggregation solutions beyond its current customer base to various government and non-government entities [1].
Recently, the PSU has floated a tender to enlist technical support in offering end-to-end payment services. Currently, IRCTC operates its own payment gateway, iPay, which serves its existing customer base, featuring a unique UPI-based feature called "Auth & Capture/One-time Mandate," allowing users to authorize payments from their bank accounts or payment instruments while keeping a temporary hold on the funds [1].
While the market for payment aggregation remains competitive, with established players and startups like Getepay, which recently earned RBI approval to function as a payment aggregator [2], success will hinge on IRCTC's ability to grow its operations efficiently and entice an influx of merchants and government entities to its platform.
[1] - Potential Impact on Revenue[2] - Challenges and Market Landscape
- If approved for a payment aggregator license, IRCTC, the subsidiary IRCTC Payments, and its technologically-driven fintech solutions could tap into numerous government and non-government entities, expanding beyond its current customer base in the railways ecosystem.
- As IRCTC sets out to build its fintech empire, it will increasingly rely on its payment aggregation services, similar to established players such as Getepay, to drive growth and penetrate markets.
- With the highly competitive market for payment aggregation and an influx of new players, success will largely depend on IRCTC's ability to efficiently scale operations and entice partnerships with merchants, government entities, and other fintech companies like Getepay, leveraging cutting-edge technology to set itself apart in the digital finance market.
