Further to Reserve Bank Of India’s (RBI) April 7th announcement on wallet interoperability, the central banker has released a notification yesterday directing wallet players to enable interoperability by April 2022.
During the April 2021 Monetary Policy Committee meeting, RBI had announced that PPIs (prepaid payments instruments) such as digital wallets have to be made interoperable which has been a bone of contention for payments players for a long time. After the RBI released its Master Directions in October 2017, digital wallets were expected to become interoperable within six months. But the plans were put on hold. Now, it has been mandated for fully know-your-customer (KYC) compliant PPIs.
“It shall be mandatory for PPI issuers to give the holders of full-KYC PPIs (KYC compliant PPIs) interoperability through authorised card networks (for PPIs in the form of cards) and UPI (for PPIs in the form of electronic wallets),” said RBI in a notification.
Interoperability will be mandatory on the payment acceptance side as well. The deadline for enabling these measures is 31st March 2022. This essentially means that digital mobile wallet users across the likes of Paytm, PhonePe users can transfer money across wallets.
Also, customers of full KYC-compliant PPIs issued by non-bank PPI issuers can withdraw a maximum of INR 2,000 per transaction and INR 10,000 per month per PPI (Tier 1 to 6 centres). All cash withdrawal transactions performed using a PPI card or wallet have to be authenticated by an Additional Factor of Authentication (AFA) / PIN, said the RBI.
Current regulations allow cash withdrawal only for full-KYC PPIs issued by banks, such as debit and credit cards. Now with these new rules, even a payments wallet or a prepaid card can be used to withdraw cash at ATMs, micro-ATMs and eligible Point of Sale (PoS) terminals.
However, PPI issuers offering these facilities will have to ensure proper customer redressal mechanisms. “Complaints in this regard shall fall under the ambit of the respective ombudsman schemes and instructions on limiting liability of customers,” said RBI.
PPI issuers will also have to ensure a suitable cooling period for cash withdrawal upon opening the PPIs or loading / re-loading of funds into PPIs to prevent the risk of fraudulent transactions. The cooling period is the duration during which transactions are not permitted, similar to how banks do not permit transfer of funds to new beneficiaries for a fixed time period.
PPIs for Mass Transit Systems (PPI-MTS) will be exempted from interoperability while Gift PPI issuers have the option to offer interoperability. Gift PPIs or closed system PPIs can only be used in establishments that issue them, for instance, non-reloadable gift cards.
Fintech experts suggest that RBI has finally realised that the financial inclusion battle can’t be triumphed by the banks alone. With internet-enabled smartphones available in every alternate household nowadays, the banking infrastructure has to evolve to meet the needs of last-mile users and bringing digital wallets into this fold can help achieve those goals.