What is PPI?
PPIs or Prepaid Payment Instruments come with a pre-loaded value and in some cases a pre-defined purpose of payment. They facilitate the purchase of goods and services as well as inter-personal remittance transactions such as sending money to a friend or a family member. These payment instruments are licensed and regulated by the Reserve Bank of India.
PPIs mainly are of five types:
- Closed System Payment Instruments
- Semi-Closed System Payment Instruments
- Semi-open System Payment Instruments
- Open System Payment Instruments
- Mobile Prepaid Instruments
Semi-Closed System Payment Instruments:
These payment instruments are redeemable at a group of clearly identified merchants that contract specifically with the issuer to accept the payment instrument. These instruments do not permit cash withdrawal or redemption by the holder.
Example: Oxigen Wallet, Mobikwik Wallet, Paytm and PayUMoney.
Semi-open System Payment Instruments:
These are payment instruments that can be used to purchase goods and services at any card-accepting merchant locations (Point of sale terminals). These instruments do not permit cash withdrawal or redemption by the holder.
Open System Payment Instruments:
These payment instruments can be used for purchase of goods and services and also permit cash withdrawal at ATMs, Merchant Local Locations, and automated business correspondents. Examples: Visa, Mastercard, RuPay.
What are new RBI norms for PPIs?
The Reserve Bank Tuesday released operational guidelines to facilitate payments among prepaid instruments (PPI) such as mobile wallets, a move aimed at promoting digital transactions.
The guidelines elaborate on requirements for achieving inter-operability for mobile wallets and cards, and norms for customer protection and grievance redressal.
According to the guidelines, inter-operability among mobile wallets, and between bank account and e-wallet would be enabled through the Unified Payments Interface (UPI) system.
In case where PPIs are issued in the form of cards, the cards shall be affiliated to the authorised card networks.
The inter-operability would be achieved in a phased manner — inter-operability of PPIs issued in the form of wallets through UPI, between wallets and bank accounts through UPI, and interoperability for PPIs issued in the form of cards through card networks.
The guidelines mandate that PPI issuers shall have a board approved policy for achieving PPI inter-operability. Inter-operability is the technical compatibility that enables a payment system to be used in conjunction with other payment systems.
It would allow PPI issuers, system providers and system participants in different systems to undertake, clear and settle payment transactions across systems without participating in multiple systems.
It further said card networks are allowed to onboard PPI issuers to join their network. Non-bank PPI issuers are permitted to participate as members/associate members of authorised card networks.
So will do non-bank companies run card network, or mobile wallets are deciding futures in this country. Also non of the mobile wallet companies allow to transfer money to each other. This competition and service still need to give more clarity soon.