PA Audits: What Fintechs Must Track

Why RBI Tightened PA Audits

Over the last year, the Reserve Bank of India (RBI) has made Payment Aggregator (PA) audits a core part of its compliance supervision. Under Rbi Pa Audit Framework, fintechs that collect or process digital payments must now undergo mandatory system audits every year. These audits ensure data protection, merchant due diligence, and fund settlement accuracy.

The move follows several cases of weak escrow practices and delayed settlements in 2024, which exposed gaps in how fintechs handled merchant and customer funds. RBI’s focus now is on “end-to-end traceability” — ensuring that every rupee collected from a customer is accounted for until it reaches the merchant.

Simply put, Payment Aggregators are no longer just technology intermediaries — they are now regulated financial service providers expected to operate with bank-level transparency.

Insight: RBI’s audit goal is clear — “no invisible flow of funds” between customers, aggregators, and merchants.

What Fintechs Must Track in 2025

Under Pa Compliance Checklist, RBI has defined 10 key control areas for PAs. Each must be monitored quarterly and verified by a CERT-In–empanelled auditor. These include:

• Escrow Reconciliation: Daily verification of settlement accounts and merchant payouts.
• Merchant KYC: Periodic review of all onboarded merchants, including beneficial ownership checks.
• Transaction Flow Mapping: End-to-end documentation of APIs, partner banks, and settlement legs.
• Data Security: Compliance with PCI-DSS, encryption of PII data, and secure key management.
• Chargeback Handling: Clear customer redressal timelines and reporting to RBI portals.
• Third-Party Risk: Monitoring of sub-merchants, vendors, and white-labeled apps integrated into PA rails.

RBI’s 2025 directive also mandates “Dynamic Escrow Visibility,” meaning fintechs must provide real-time access to their escrow positions to both partner banks and auditors.

Tip: Build automated dashboards that show real-time settlement, merchant balances, and pending chargebacks.

Audit Red Flags: Common Mistakes Found

During the last PA inspection cycle under Rbi Licence Renewal Process, RBI identified several recurring gaps across fintechs — especially newer startups. Common issues included:

1. Delayed settlements: Funds were parked in escrow longer than permitted under RBI timelines.
2. Inadequate merchant vetting: Aggregators failed to verify merchant business models, leading to fake or banned categories.
3. Weak IT controls: Access logs and API authentication lacked multi-factor verification.
4. Non-segregation of funds: Some platforms pooled customer and merchant funds in the same account.
5. Outdated audit reports: Fintechs submitted annual reports that did not reflect real-time operational risks.

RBI has started cross-verifying PA audit results with partner banks’ data to catch inconsistencies. Any mismatch in merchant reconciliation could now trigger a licence review or temporary suspension.

Insight: Audit delays can hurt business continuity — RBI now tracks audit timelines at the entity level.

Preparing for the Next PA Audit Cycle

Fintechs preparing for the next RBI audit cycle must align compliance monitoring under Fintech Risk Controls and create an internal “audit readiness” process. This includes self-assessment checklists and mock audits every quarter.

Smart preparation tips:

• Keep digital audit trails: Store logs, reports, and reconciliation files in a secure, easily retrievable format.
• Automate alerts: Set triggers for escrow mismatches or delayed settlements beyond T+1.
• Update vendor contracts: Ensure all payment partners follow the same data governance policies.
• Conduct risk drills: Simulate data breaches or API downtimes and document incident responses.
• Stay ahead of regulation: RBI may extend PA rules to BNPL and prepaid ecosystems by late 2026.

By integrating technology-led compliance, fintechs can reduce manual errors and build regulator trust. In an era of tighter supervision, “continuous audit” may become the norm — not the exception.

Tip: Treat audits as a product feature — not a burden. They build credibility with banks and investors alike.

Ultimately, RBI’s tougher audit stance isn’t meant to slow innovation but to strengthen confidence in India’s fast-growing digital payments ecosystem. Fintechs that build compliance muscle early will lead the next phase of regulated growth.

Frequently Asked Questions

1. What are PA audits under RBI rules?

They are mandatory annual reviews of Payment Aggregators’ systems, escrow accounts, and merchant compliance, done by RBI-approved auditors.

2. How often must fintechs conduct PA audits?

Every year, with quarterly internal reviews to ensure continuous compliance tracking.

3. What are the main areas covered in audits?

Escrow reconciliation, merchant onboarding, data security, and settlement timelines are key focus points.

4. Can RBI revoke a PA licence for audit failure?

Yes. Consistent non-compliance or inaccurate reporting can lead to suspension or revocation of the PA authorisation.

5. How can fintechs prepare better?

Automate compliance dashboards, run internal mock audits, and maintain transparent records of merchant settlements and refunds.