What RBI norms on PPIs mean for e-wallets, users
With the Reserve Bank of India (RBI) releasing operational guidelines on interoperability of prepaid payment instruments (PPIs) on Tuesday, mobile wallet users will soon be able to transfer funds from one wallet to another. Mint analyses how the rules will impact wallet firms, users.
What does interoperability of PPIs mean?
Interoperability enables payment systems to be used in conjunction with other payment systems. It allows PPI issuers, system providers and system participants from different systems to undertake, clear and settle transactions across systems without participating in multiple systems. Once PPI is implemented, users will be able to transfer funds between wallets and also from their wallets to bank accounts. Till now, a user who has, say, a Paytm wallet couldn’t make a payment from his wallet to one run by a rival firm. This will change as the new rules are implemented.
How will it be implemented?
According to RBI, interoperability will be introduced in a phased manner. In the first phase, interoperability of PPIs issued in the form of wallets will be introduced through unified payments interface (UPI). In the second phase, interoperability between wallets and bank accounts through UPI will be introduced and, eventually, in the last phase, interoperability of PPIs issued in the form of cards will be implemented through card networks. “PPI issuers operating exclusively in specific segments like meal, gift and mass transport system may also implement interoperability,” said RBI.
Will this change how merchants get payments?
If a merchant has signed up for one wallet with full KYC (know your customer), he needn’t sign up for others: he will receive payments from any wallet.
How do the rules on interoperability impact e-wallet companies?
Once interoperability is rolled out completely, e-wallets will almost be on a par with payment banks. It would open up another window for wallet companies to explore new business opportunities, said an industry expert. According to the chief executive of an e-wallet company who spoke on condition of anonymity, the PPI industry was looking forward to these guidelines for almost a year and the rules have made the industry more lucrative for new companies to join.
How will users be impacted?
Mobile wallet users may soon be able to transfer funds from one wallet to another. This means they don’t have to download another wallet if they already use an e-wallet. They can pay across merchant networks of any other PPI through UPI. However, customers will have to do their KYC with the wallet companies, as only full-KYC PPIs would be able to avail of the benefits of interoperability. KYC is a process through which financial institutions verify information about customers.