Both wallet and PPI issuers must be interoperable, according to the RBI

The Reserve Bank of India (RBI) announced that all full-KYC prepaid payment instruments (PPIs) and other payment infrastructure would be needed to interoperate. The regulator also increased the maximum outstanding balance in PPIs from Rs 1 lakh to Rs 2 lakh and allowed cash withdrawals from full-KYC non-bank wallets. In terms of service offerings, the regulations essentially put wallets on par with bank accounts.

Shaktikanta Das, the governor of the Reserve Bank of India, expressed his displeasure with industry players’ lack of effort to move toward voluntary interoperability. In October 2018, the central bank released guidelines for full-KYC PPIs to implement interoperability voluntarily. Das stated that because the migration to interoperability has been minimal, it will now be needed for full-KYC PPIs and all payment acceptance infrastructure.

Cash withdrawal is currently limited to full-KYC PPIs provided by banks. Allowing cash withdrawals from all PPIs, combined with the mandate for interoperability, is expected to improve migration to full-KYC PPIs and complement the acceptance infrastructure in Tier-III to -VI centers RBI. Besides, non-bank payment system operators such as PPI issuers, card networks, white-label ATM operators, and trade receivables discounting system (TReDS) platforms would use the RBI-operated centralized payment systems (CPSs) – RTGS and NEFT. The measure aims to reduce the likelihood of a settlement.

In response to a question about data breaches at non-bank PPIs and the RBI’s supervisory architecture, executive director T Rabi Sankar said the regulator’s goal will always be to protect customers and make transactions secure as possible. To that end, similar to the guidelines we recently released to banks, we are considering issuing guidelines that would provide the basic minimum standards for cybersecurity and other security issues. In terms of such incidents, he said, “we are fully aware of the situation and are taking all necessary measures to minimize the likelihood of such occurrences.”

According to Manoj Chopra, VP and head of products and innovation at InfrasoftTech, interoperability could help wallets reclaim market share lost to banks and other players due to the emergence of the Unified Payments Interface (UPI) and new KYC requirements. “Offered cashbacks were also ineffective. Interoperability would give wallets and PPI providers the much-needed boost,” Chopra said, adding that the move will be risky. Customers will need to be more cautious of digital frauds, and wallet providers will need to improve their technology infrastructure to handle these threats.

According to Ketan Doshi, MD of PayPoint India, as wallets gain access to the majority of transaction features available on bank accounts, they will effectively compete for micro-savings from underbanked segments.

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