Simpl Faces RBI Crackdown Over Unauthorized Payment Services

The Reserve Bank of India (RBI) has ordered Simpl, which is a Bengaluru-based buy-now-pay-later (BNPL) firm, to shut its payments operations with immediate effect.

The platform works with 26,000 merchants and lets customers delay their payments at checkout. However, it was running its payment system without permission from the central bank. According to the Payment and Settlement Systems Act of 2007, companies must get official approval before offering such services.

The latest order is part of the RBI’s ongoing effort to control the rapidly growing digital lending space. “Buy Now, Pay Later” (BNPL) services have become very popular in recent times. It offers instant credit to customers and provide smooth checkout experience for merchants. But industry sources say the RBI is worried about unsecured lending, lack of proper supervision, and weak consumer protection. In 2022, the RBI had already stopped BNPL companies from loading prepaid wallets with borrowed money.

Simpl’s current problems are similar to a crackdown last year, when card networks were pulled up for allowing business payments through unapproved third-party platforms. In both situations, the issue was the same: running payment clearing and settlement systems without a proper licence.

However, there’s a major difference. The card networks case involved corporate payments, while Simpl’s case deals with consumer credit and payment collection. Still, the RBI’s message is clear: whether it’s card-based or BNPL, all digital payment systems must follow its rules.

Simpl, run by One Sigma Technologies, has also been investigated by the Enforcement Directorate (ED) for possibly breaking foreign investment and currency rules. The company reportedly raised Rs. 913 crore by claiming to be an IT services firm, which allows for 100% automatic foreign investment. But the ED believes that Simpl is actually a financial services company – a category that needs government approval for foreign funding, which it didn’t get.

A senior Simpl executive explained the firm’s approach, saying “we use our own money against our own collateral; no public money is involved. If a customer defaults, the loss is ours.” The person added that Simpl does not charge interest. “We earn a merchant fee and levy a flat late fee, so customers don’t enter an Interest spiral.”