Mastercard-backed fintech startup Instamojo has shut down its core payments business after the Reserve Bank of India rejected its application to operate as a licensed payments aggregator in September, citing non-compliance with eligibility criteria.

Consequently, Instamojo has shifted its focus away from payments following the regulatory setback, The Morning Context reported.

Instamojo has promptly ceased its business operations after the RBI rejected its payment aggregator application. While payment companies typically have 180 days to wind down operations following a rejection, Instamojo has chosen an immediate shutdown, indicating that they would not reapply as well.

According to the report, InstaMojo is actively seeking a potential buyer as its founders aim to exit the business. Additionally, the startup has faced challenges in securing funding over the past few months, encountering difficulties with both existing and new investors.

Founded in 2012 by Sampad Swain, Akash Gehani and Aditya Sengupta, Instamojo is an ecommerce platform for independent businesses, direct-to-consumer (D2C) brands and micro, medium and small enterprises (MSMEs) that enable them to start, manage and grow their business online.

In early 2019, the startup raised INR 50 Cr as a part of its Series B funding round from Gunosy Capital, Japanese payments firm AnyPay and existing investors. It also counts Kalaari Capital and Blume Ventures among its investors.

Queries sent to Instamojo did not elicit any response till the filing of this article.

Introduced by the RBI in March 2020, the payment aggregator framework requires all payment gateway operators to obtain a license for acquiring merchants and implementing digital payment solutions.

Payment aggregators (PAs) facilitate merchants and ecommerce platforms in accepting payments by providing their technological infrastructure for streamlined online transactions. However, the licensing process, initiated three years ago, has become challenging and cumbersome procedure for payment solution providers.

Strict regulations from the central bank have resulted in numerous PA applications, including those from Paytm and LivQuik, remaining in a state of uncertainty. Even prominent names like MobiKwik’s Zaakpay faced delays and had to submit multiple applications before obtaining their licenses.

Earlier in February, RBI granted in-principal authorisation to 32 existing payment aggregators (PAs) to act as online PAs.

Amazon (Pay) India Pvt Ltd, Paymate India Ltd, Razorpay Software Pvt Ltd, Pine Labs Pvt Ltd and Zomato Payments Pvt Ltd were among the PAs that had been granted in-principle authorisation.

As per a report, the Indian payment gateways market is projected to grow to $2.68 Bn by 2027.