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Prepaid Payment Instruments

Now Fund Transfer between Mobile Wallets through UPI (Unified Payments Interface)!

With recent RBI notification, mobile users will be able to transfer money among the mobile wallets. For the very first time, interoperable cards will be issued by non-bank PPI (prepaid payment instruments) issuers in association with card networks however the cards should be EMV and PIN compliant.

Recently on 16th October 2018, Reserve Bank of India has issued guidelines for interoperability between prepaid payment instruments like mobile wallets. These guidelines for interoperability of prepaid payment instruments (PPIs) have not been introduced to allow such fund transfer to PPIs such as mobile wallets whereas these guidelines have been issued for those participating PPI issuers, who choose to adopt interoperability. No, minimum net worth requirement has been imposed by the RBI on mobile wallets. This will enable PPIs in seamless fund transfer. Now there will be a free flow of funds between the wallet and the bank account.

Now before moving forward, let’s understand interoperability. Interoperability enables compatibility between payment systems. After its implementation, a mobile user will be able to transfer funds between the mobile wallets and besides this, it will also enable fund transfer from mobile wallets to bank accounts.  Inter-operability is nothing but a technical compatibility which enables one payment system to be used with the other payment systems.

What’s the Reason behind the Guidelines for Interoperability of Prepaid Payment Instruments (PPIs)?

This step has been taken by the Reserve bank of India in order to promote the digital transactions. Operational guidelines have been issued with a view to facilitating payments among the PPIs (Prepaid Payment Instruments). These guidelines elaborate on the following:

  • Requirements for achieving interoperability for wallets and cards;
  • Guidelines for customer protection and
  • Norms for grievance redressal.

What will be the Manner of Interoperability?

In a proper manner, interpretability will be achieved, like

  • Interpretability in case of PPIs issued in the wallet form through UPI
  • Interpretability in between mobile wallets and bank accounts through UPI, and
  • Interoperability in case of PPIs issued in the cards forms through card networks.

For the purpose of PPI interoperability, there must be a board-approved policy for the PPI issuers as per the guidelines. Without participating in multiple systems, this will enable PPI issuers to undertake and settle payment transactions across systems.

RBI has made it clear that wallet interoperability will take place only through UPI (Unified Payment Interface) and cards interoperability will take place through the cards networks. It is mandatory for the PPI issuers to adhere all the prescribed security guidelines laid down by the NPCI (National Payments Corporation of India) for the purpose of security.

Note: Interoperability is permitted for only full KYC wallets.

Interoperability through UPI

The Reserve Bank of India (RBI) has clarified that interoperability shall be allowed through UPI (Unified Payments Interface) in case of Prepaid Payment Instruments such as mobile wallets. Interoperability would be enabled only through the UPI among the mobile wallets and among the mobile wallets and banks.

It is also said by the Reserve bank of India that interoperability may also be implemented by those PPI issuers who are exclusively handling segments such as meal, gift, and mass transport system. In the case of PPIs in the cards form, it shall be affiliated to the authorized card networks. In the UPI (Unified Payments Interface), PPI issuers shall act as payment system providers (PSP). Risk management aspect will be considered by the NPCI (National Payments Corporation of India) to issue handle. Only customer wallets shall be linked to the handle issued to the PPI issuers.

For UPI (Unified Payments Interface), PPI holders shall be on-boarded by their own PPI issuer only. PPI issuers shall only link their customer wallets to the handle issued to them and along with this; customers of any bank or any other PPI issuer shall not be on-boarded.

Previous Scenario

Last year in October on interoperability, the directive to banks and PPIs were issued by the RBI. At that time RBI clarified that operational guidelines will be separately issued in coming future. While RBI said that within 6 months PPI issuers including banks & nonbanking entities shall make all the KYC-compliant PPIs in the form of wallets interoperable among themselves through the UPI. RBI also clarified that interoperability shall be enabled among the mobile wallets and bank accounts through UPI subsequently and interoperability for PPIs in the cards form shall also be enabled in due course. Through KYC, financial institutions verify customer information.

Note: For your better understanding, let me explain to you that the UPI (Unified payment interface) is a payments system which has been launched in August 2016 by the NPCI (National Payments Corporation of India). UPI enables the instant fund transfer among the two bank accounts on the mobile platform; under this system, there is no need to provide the beneficiary’s bank account details.


This guideline in relation to interoperability will enable customers to select such digital wallet in which they preferred to transact according to their wish. This move will be a huge benefit for the digital and cashless payments in India. For interoperability, PPI issuers would have to ensure that they have adhered to the technical and operational requirements such as related to safety, security and risk mitigation etc. Currently, banks and non-bank entities have been issuing PPIs after obtaining the prior approval of RBI as per the Payment and Settlement Systems Act, 2007 (PSS Act).

Now mobile wallet will enable customers to make transactions from one wallet to another wallet which is run by another company. We welcome this RBI guideline as it is a very impressive step taken for non-bank players. Now, it will enhance UPI accessibility on a large scale even for banks and nonbank entities. Mobile wallet companies have started their celebration for interoperability among the mobile wallets and mobile wallet and bank accounts. Now they will be able to issue interoperable prepaid cards as well.

Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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