The Reserve Bank of India has released the guidelines for interoperability between prepaid payment instruments (PPIs) such as wallets and cards that will effectively allow users of popular payment wallets such as Paytm, Freecharge, Mobikwik, PhonePe, and PayZapp, among others, to transfer money from one wallet to another.
As per the guidelines, where PPIs are issued in the form of wallets, interoperability across PPIs shall be enabled through UPI and Where PPIs are issued in the form of cards, the cards shall be affiliated to the authorized card networks.
The guidelines, while boosting the e-wallet segment, would also ensure the safety and accuracy of the transfer of money by individuals from one wallet to another.
The interoperability amongst PPIs is going to significantly boost the e-wallet industry. The guidelines would also ensure that not only the customer’s money remains safe but when the transition happens from one e-wallet app to another, it reflects utmost speed and accuracy for the interoperability to be effective and efficient.
The Unified Payments Interface (UPI) is a system developed by the NPCI and the RBI to aid instant transfer of money using a cashless system. Using UPI services, one just requires a smartphone and a banking app to send and receive money instantly or to pay a merchant for a retail purchase. In the long run, UPI is likely to replace the current NEFT, RTGS, and IMPS systems as they exist today.
The UPI ecosystem functions with three key players:
Payment service providers (PSPs) to provide the interface to the payer and the payee. Unlike wallets, the payer and the payee can use two different PSPs.
Banks to provide the underlying accounts. In some cases, the bank and the PSP may be the same.
NPCI to act as the central switch by ensuring VPA resolution, affecting credit and debit transactions through IMPS.
UPI, built on IMPS, allows a payment directly and immediately from a bank account. There is no need to pre-load money in wallets. It allows payments to different merchants without the hassle of typing one’s card details or net-banking password.