Razorpay informs discontinuation of UPI services to gaming platforms, later says the communication was erroneously sent

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[This post is updated with a clarification from Razorpay stating services including UPI payment options will continue as usual and the email communication was erroneously sent.]

Razorpay, India’s leading payment gateway provider has informed the online gaming platforms that UPI payment option will be discontinued from 31 December due to regulatory changes, said industry sources privy to the development.

The change is reportedly due to NPCI directing payment gateway service providers to stop using UPI platform for facilitating payments related to online gaming. Team G2G couldn’t independently verify the development. We will update the post as and when more information is available (see updates below).

Update 1: Screenshot of email communication from Razorpay

Online real money gaming grew multifold in the backdrop of Covid19 lockdowns and UPI penetration has helped the gaming companies in a positive way. Often illegal betting apps configured UPI payments on their portals which ended up in money laundering. In April, online payment firms including Cashfree and MobiKwik have come under the scanner of the Reserve Bank of India (RBI) for facilitating online gambling and betting payments. Cashfree later denied these reports.

This is not the first time NPCI has issued directions impacting online gaming sector. In 2021, alarmed by low value but high volume transactions, NPCI directed payment gateways to stop UPI payments of less than INR 1. This direction was ultimately not implemented.

In present communication, Razorpay said all other payment options will be continued indicating the regulatory change is coming from NPCI. At the time of writing this, it is not clear if similar communication is sent by other payment platforms.

Response from Razorpay: After this post was published, Razorpay corporate communications team has reached out to us stating the message was erroneously sent to few gaming merchants. The payment platform has sent subsequent email to merchants stating the services and payment options including UPI, will continue as usual.

Subsequent email from Razorpay retracting the earlier communication

According to a 2020 payment aggregator framework, only firms approved by the RBI can acquire and offer payment services to merchants. The existing payment aggregators are required to achieve a net worth of ₹25 crores by March 31, 2023. The net worth of ₹25 crores shall be maintained at all times. RBI, while scrutinizing payment aggregator applications has reportedly asked the payment platforms to cut exposure to online gaming platforms.

Only yesterday, the central government recognised online gaming and eSports by designating Information Technology and Sports ministries as nodal ministries respectively. The central government may also soon come up with draft guidelines for online gaming intermediaries thereby providing regulatory clarity.