ICICI Bank Seeks ₹100 Crore Recovery From Fintech Firms Over Merchant Misclassification Dispute
New Delhi, May 25: ICICI Bank has reportedly initiated recovery proceedings worth at least ₹100 crore against several fintech firms over alleged merchant category misclassification, highlighting growing tensions between traditional banks and payment technology companies over interchange income losses.
Dispute Linked To Merchant Category Classification
According to industry sources, the private-sector lender has raised disputes through global card network Visa, alleging that certain fintech firms incorrectly classified merchant transactions into lower interchange categories.
Merchant category classification plays a key role in determining interchange fees earned by issuing banks during card transactions. Lower-category classifications generally attract lower interchange rates, reducing revenue earned by banks.
Sources indicated that the alleged misclassification may have significantly affected interchange income for issuing banks over the past year.
ICICI Bank Seeks Recovery Through Visa
Industry insiders said Visa has asked certain fintech firms to return more than ₹100 crore to ICICI Bank after disputes were raised over the transaction categorisation practices.
The move is being viewed as one of the first major recovery actions by an Indian bank in relation to alleged interchange revenue losses linked to fintech transaction routing and merchant tagging practices.
The dispute reflects increasing concern among banks regarding payment processing structures adopted by some fintech platforms.
Banks Concerned Over Falling Interchange Income
Banks have reportedly become increasingly uncomfortable with the erosion of interchange income, particularly as digital payments continue to grow rapidly across India.
Interchange fees remain an important revenue source for card-issuing banks. Any incorrect merchant classification can directly affect the amount banks receive from payment transactions.
Industry experts believe the issue has gained greater attention as fintech firms continue expanding aggressively in digital payments, merchant acquisition and transaction processing services.
RBI Has Been Monitoring Payment Fintech Practices
The Reserve Bank of India has reportedly been examining concerns related to merchant category classification practices among payment fintech companies since 2025.
Regulatory scrutiny has increased amid concerns that certain transaction structures may be affecting transparency, compliance and revenue allocation within the payments ecosystem.
The matter also highlights the broader regulatory challenge of balancing innovation in digital payments with fair practices for banks, payment networks and merchants.
Rising Friction Between Banks And Fintech Companies
The latest dispute signals growing friction between traditional financial institutions and fintech firms as both sides compete for a larger share of India’s rapidly expanding digital payments market.
While fintech companies have accelerated digital transaction adoption and merchant onboarding, banks are increasingly focused on protecting revenue streams and ensuring compliance with card network rules.
Industry observers believe similar disputes could emerge in the future as regulators and financial institutions tighten oversight of payment infrastructure and transaction classification practices.
Digital Payments Ecosystem Faces Greater Regulatory Attention
India’s digital payments ecosystem has grown rapidly in recent years due to increased smartphone penetration, UPI adoption and fintech expansion. However, the sector is also witnessing stronger regulatory oversight as authorities seek to improve transparency and reduce operational risks.
The ICICI Bank-Visa dispute may become an important precedent for how interchange-related disagreements between banks and fintech firms are handled going forward.
