India’s digital wallets to get transfer boost and incentives for KYC
Digital payment wallets could be bolstered in India following changes to allow interoperability between wallets as long as users are checked for KYC compliance. The Reserve Bank of India (RBI) and India’s payment body are allowing more flexibility for the digital payments system as the Unified Payments Interface (UPI) will be extended to e-wallets and no longer be solely for banks, reports Mint.
UPI will be used for loading money to digital wallets and then allow users to transfer money easily between them. The RBI recently mandated that issuers of prepaid payment instruments (PPIs) to be ready for interoperability by 31 March 2022.
ICICI Bank became the first lender to add the feature for its Pocket wallets on 26 May after working with the National Payments Corp of India (NPCI) to link the wallets to the UPI.
Customers will have to be fully KYC compliant to enjoy the new services. Mint quotes the RBI as saying in April 2021 that there will be an incentive for users to become fully KYC compliant for PPIs in the form of doubling the balance limit from 100,000 rupees to 200,000 rupees (US$1,370 to $2,740).
There were 22.3 billion UPI bank transactions worth 41 trillion rupees ($562 billion) since in the year to the end of March 2021, reports Mint quoting the RBI. This compares to 4 billion e-wallet transactions worth 1.52 trillion rupees ($16.4 billion) in the same period.
Digital wallets lost their appeal to users in 2016 when the NPCI introduced the rapid interbank payments UPI system, making e-wallets comparatively inconvenient.
Mihir Gandhi, partner and leader of payments transformation at PwC is optimistic as quoted by Mint: “It is expected that wallets will be used for person-to-merchant transactions where there is convenience and some rewards to the customer. The new rules will lead to more wallet transactions at merchant outlets where the customer can use UPI to pay for goods or services, either offline or online.”
RBI has been attempting to balance fraud concerns in the expanding financial ecosystem and KYC standards with the desire (and court mandates) to limit Aadhaar’s scope.