In an effort to promote digital transactions, The Reserve Bank released guidelines to facilitate payments among different mobile wallets, in 2018. RBI issued these consolidated guidelines to enable 3 different phases in order to prepare better for the implementation of interoperability.
Interoperability is the technical compatibility that allows a payment system to be used in conjunction with other payment systems. It allows Prepaid Payment Instrument (PPI) issuers, participants, and providers in different systems to undertake payment transactions, without having to participate in multiple systems.
Before the PPI standards were put in place, a mobile wallet user couldn’t make a payment from his wallet to one run by a rival firm. However, after the Prepaid payment instruments was implemented, users were able to transfer funds between wallets and also from their wallets to bank accounts.
Before The RBI released these guidelines in 2018, interoperability of all KYC-compliant Prepaid Payment Instruments was to be enabled in three phases. These phases included:
So now, if a merchant has signed up for one wallet with full KYC (Know Your Customer), he does not require signing up for others and he can receive payments from any wallet.
Since PPIs have been playing an important role in promoting digital payments, a new type of PPI has been introduced, which can be used only for the purchase of goods and services up to a limit of Rs 10,000. The loading of such PPI will be from a bank account and used for making only digital payments like bills, merchant payments, etc. This new Prepaid payment instruments can be issued on the basis of essential minimum details sourced from the customer.
RBI Rules for such PPIs state that
After the interoperability was rolled out completely in 2018, e-wallets were on a par with payment banks. It opened up a new window for wallet companies to explore new business opportunities. The Prepaid payment instruments industry waited quite long for these guidelines and the new rules made the industry more lucrative for new companies to join.
Today, mobile wallet users can transfer funds from one wallet to the other, effortlessly, without having to download another wallet. They can pay across different networks of any other Prepaid payment instruments through UPI. Once the users have done their KYC with the wallet companies, they can avail of the benefits of interoperability.