What are prepaid wallets?
With a crunch of cash in sight, most people are nowadays rushing to cashless transactions. An effective way of such a payment option is through a prepaid wallet which helps transactions to be carried out with transparency, scalability and accountability. The RBI helps in classifying cashless fund transfer or transactions using cards or mobile phones as prepaid payment instruments.
There are three types of Pre-paid wallets as per the guidelines of RBI:
- Closed wallet.
- Semi closed wallet.
- Open wallet.
These wallets have gained recognition as a payment option especially in e- commerce and telecom services, as they can be used to pay the services.
1. Open wallet:
This is a type of wallet which can be used to purchase of goods and services and also permit cash withdrawal at ATM's. These wallets can be used for purchase of goods including financial services such as funds transfer at merchant locations, also cash withdrawal at automated business correspondents. Thus these are wallets used to buy goods and services, including fund transfer at merchant locations, also permit cash withdrawals at ATM'S. All Visa and master cards fall into this category.
2. Closed wallet:
Closed wallets are wallets which are issued by a company to a consumer for buying goods and services exclusively from that company. Mostly these function as an account where money gets credited in case of a refund due to cancellation or return of a product or service. Thus it is issued by an entity for purchasing goods and services only from it, and these doesn't allow cash withdrawal or redemption.
3. Semi closed wallets:
It is a wallet that can be used to buy goods and services, as it is a payment instrument that are redeemable of clearly identified merchants that contract specifically with the issuer to accept the payment instrument. This type of wallet does not permit cash withdrawal or redemption by the holder. Thus these instruments can be used to buy goods and services by identifying merchant locations or establishments in which the issuer accepts the payment instrument.
Procedure for Pre-paid wallet License from RBI
1) Incorporation of Company in accordance with the Companies Act.
- Application for name to Registrar of Companies.
- Approval of name by ROC.
- Preparation of draft memorandum of association and articles of association.
- Preparation of all the incorporation documents.
- Submission of incorporation documents to Registrar of Companies.
- Certificate of Incorporation received.
2) Filing of form A with the Reserve bank of India. (Application for authorization for commencing or carrying on a payment system).
3) Submission of Application fees of Rs. 10,000/-
4) After consideration of all the particulars furnished by applicant, Reserve bank of India, may issue an authorization certificate in form B. (CERTIFICATE OF AUTHORIZATION).
5) RBI may impose such conditions as it may deem fit.
Documents required for Pre-wallet license
- Name of applicant.
- Constitution of applicant.
- Address proof of registered office.
- Certificate of Incorporation.
- Main business of company.
- Management information.
- Statutory auditor of Company.
- Audited balance sheet.
- Name and address of bankers of Company.
- Any other documents as may be required.
Additional Documents required fro Pre-Wallet License
- Particulars of payment system including process flow, technology to be used, security features, inter-operability etc.
- Expected benefits to the financial systems.
- Operating risks.
- Amount of finance required.
- Sources of finance.
- Amount of own capital proposed.
- Amount of borrowings expected from banks.
- Rate of return on investment.
- Any other information.