As the fintech industry gears up for the Reserve Bank of India’s (RBI) guidelines for issuers of prepaid payment instruments (PPIs), industry players say the guidelines will enable interoperability between non-bank wallets alone, without encroaching on banks’ turf.
The central bank had in March circulated draft guidelines for non-bank PPI issuers. Last week, it said the revised master directions will be issued by October 11 and interoperability among PPIs compliant with know your customer (KYC) norms shall be implemented within the next six months. “In line with the vision for payment and settlement systems in the country, the revised framework will pave the way for bringing inter-operability into usage of PPIs,” RBI said on October 4 in a document titled ‘Statement on Developmental and Regulatory Policies’.
While the statement does not clarify on interoperability between bank and non-bank wallets, non-bank issuers have taken it to mean that only non-bank wallets will become interoperable. Sameer Nigam, co-founder and chief executive officer (CEO), PhonePe, said, “Banks are not threatened by this type of wallet to wallet interoperability. Banks would have objected if wallets were becoming fully interoperable with banks, but it doesn’t look like the RBI is permitting that yet.” Bipin Preet Singh, founder and CEO of MobiKwik, said, “For the user, this means that they do not have to download another wallet if they already have MobiKwik. They can pay across the merchant network of any other PPI.”
In fact, the guidelines may force wallet-issuing companies to compulsorily enter into member-sub-member relationships with banks, if they have not done so already, said AP Hota, former managing director and CEO of National Payments Corporation of India (NPCI). “For inter-bank settlement (of transactions) wallets will have to necessarily come as sub-member of banks, unless RBI modifies their account access policy and opens it up to payment system participants,” Hota said.
Bankers, however, say that the enforcement of the KYC requirement for non-bank wallets effectively opens the door for complete interoperability between all entities. A senior executive from a state-owned bank said on condition of anonymity, “RBI had sought our views and our only reservation to permit interoperability was that the wallets be opened with full KYC. Now there will be interoperability with not only banks, but across all service providers and all wallets.”
This seems some distance away as fulfilling the KYC requirement itself would be a task for wallet issuers. PhonePe’s Nigam said, “It will take several years to migrate 150-200 million existing wallet users to full KYC status. Until then, real interoperability won’t be accomplished.” He also said that with the advent of UPI, consumers have no real motivation to go for KYC to increase their wallet limits.