Now wallets like MobiKwik, Amazon Pay can issue cards and users can transact across wallets

Soon, users of popular mobile wallets such as MobiKwik, and Amazon Pay, among others, will be able to transfer money from one wallet to another. This is made possible by the interoperability guidelines finally issued by the Reserve Bank of India (RBI).

The RBI on Tuesday issued the much-awaited operational guidelines for interoperability between different kinds of pre-paid instruments (PPIs), including meal vouchers, e-wallets, and gift vouchers. As per the latest norms, mobile wallets will also be able to issue cards in partnership with card networks. The industry has been waiting for these guidelines since April this year.

The RBI further explained in a statement,

“As non-bank PPI issuers will issue interoperable cards in association with card networks for the first time, the cards issued by these entities shall be EMV chip- and PIN-compliant.”

Today’s guidelines are in addition to the RBI’s Master Direction on PPIs, which it released in October last year. At the time, the RBI had stated that it will enable interoperability between two KYC-compliant wallets in subsequent phases.

According to the RBI’s latest interoperability guidelines for PPIs, all minimum-KYC-compliant wallets will need to be converted into full-KYC-compliant accounts within 12 months, (i.e. October 2019). The RBI also increased the net worth requirement for companies offering PPIs to Rs 5 crore from Rs 2 crore, with a minimum positive net worth of Rs 15 crore in three financial years. In addition, full KYC-compliant wallets will also be allowed outward remittances.

Further, the new guidelines also enable PPIs to issue interoperable cards for the first time in association with card networks like Visa and Mastercard.

The requirements

Here are the requirements which the RBI has laid down for PPIs to achieve interoperability:

• Where PPIs are issued in the form of wallets, interoperability across PPIs shall be enabled through UPI.
• Where PPIs are issued in the form of cards, the cards shall be affiliated to the authorised card networks.
• PPI issuers operating exclusively in specific segments like meals, gifts and MTS may also implement interoperability.
• The interoperability shall be facilitated to all KYC-compliant PPI accounts and entire acceptance infrastructure.

In case a PPI wants to achieve interoperability through card networks, it will need to ensure all mechanisms are in adherence to guidelines or requirements of card networks or of UPI. These requirements are the same for even technical and grievance redressal.

In case of interoperability through card networks, the new guideline says that ‘for the purpose of settlement, a non-bank PPI issuer can participate directly or through a sponsor bank arrangement, as the case may be’.

For non-bank PPIs to achieve interoperability through UPI, they will have to settle payments through a sponsor bank and ‘adhere to the requirements of sponsor bank arrangement in UPI'. At the same time, non-bank PPIs will also have to meet all requirements of NPCI, the RBI said.

Speaking on the new guidelines, Navin Surya, Chairman Emeritus, Payments Council of India, and Chairman, Fintech Convergence Council, said,

“We welcome and thank RBI for issuing final interoperability guidelines for PPIs. This is a very progressive move for non-bank players and huge foundations to reach under-banked and unbanked with equally powerful payment product in league of debit/credit cards. Also, now UPI would be accessible to large masses even those who are not banked or are under-banked.”

Payment banks vs digital wallets?

In August this year, YourStory reported that payments banks had submitted an anti-proposal to the RBI, contesting the value that wallet interoperability was projected bring to the industry.

At the time, industry experts believed that once interoperability was allowed, the only advantage a payments bank account would have over a full-KYC wallet was that payment bank customers could withdraw cash from ATMs and earn interest on the amount in their accounts. Now that digital wallets can issue cards for withdrawals, the gap in the list of services that wallets and payments banks offer has narrowed quite a bit.

Explaining this, Bipin Preet Singh, Co-founder of payments company Mobikwik, said,

"These guidelines give a lot more confidence and credibility to wallets as far as the consumer is concerned. It will allow consumers to pay via any other wallet over UPI, allow wallets to issue UPI handles and also allow wallets to issue cards without the requirement of a bank. This gives a lot of legitimacy to wallets as a payment system. In fact, these guidelines actually imply that the wallet is becoming like a mini bank account."

This leaves only two differences between wallets and payments banks. One, customers of payments banks can retain deposits of up to Rs 1 lakh in their accounts, while for full-KYC wallets the total amount loaded in a month cannot exceed Rs 10,000 (annual amounts are limited to Rs 1 lakh). Two, payments banks are also allowed to pay interest on the amount held in deposit.