The Reserve Bank of India (RBI) has permitted pay as you go fee devices (PPI) customers to conduct Unified Payments Interface (UPI) transactions by means of third-party cell apps, thereby enhancing the scope of digital fee providers in India.
Now, customers can switch or obtain funds by means of UPI of their PPI pockets utilizing third-party apps, making it interoperable. Beforehand, transactions might solely happen if each the sender and receiver used the identical third-party application suppliers.
A prepaid payment instrument is a monetary instrument that permits customers to load funds onto a card or digital wallet for future transactions. In India, PPIs embody cell wallets like Paytm, PhonePe, and MobiKwik, in addition to fee gateways equivalent to Razorpay and Instamojo.
“At present, UPI funds from / to a checking account may be carried out utilizing the UPI utility of that financial institution or of any third-party utility supplier. Nevertheless, UPI funds from / to a PPI can solely be carried out utilizing the cell utility supplied by the PPI issuer,” RBI stated in a statement.
“It has been determined to allow UPI funds from / to full-KYC PPIs by means of third-party UPI functions. This can allow PPI holders to make / obtain UPI funds by means of the cell utility of third-party UPI functions,” RBI stated.
A PPI issuer shall allow holders of solely its full know-your-customer (KYC) PPIs to make UPI payments by linking its buyer PPIs to its UPI deal with. UPI transactions made by means of a PPI on the issuer’s utility might be authenticated utilizing the shopper’s present PPI credentials. In consequence, the transaction might be pre-approved earlier than reaching the UPI system, the central financial institution clarified within the assertion.
Moreover, a PPI issuer, performing as a fee service supplier, can’t onboard clients from some other financial institution or PPI issuer.
A PPI issuer may additionally allow the invention of its full-KYC PPIs on third-party UPI cell functions, permitting them to be linked to their fee service supplier handles. RBI stated UPI transactions initiated from PPIs through third-party UPI apps might be authenticated utilizing UPI credentials.
Important transfer towards monetary inclusion
PPIs can embody fee wallets, good playing cards, magnetic chips, vouchers, and cell wallets.
PPIs have historically struggled with restricted compatibility with mainstream banking platforms. By integrating PPIs with UPI, the RBI has simplified linking digital wallets to UPI apps, streamlining transactions like invoice funds, purchasing, and transfers. Customers can now hyperlink totally verified PPIs to third-party UPI apps, increasing transaction choices.
The RBI’s transfer to allow UPI funds by means of full-KYC PPIs on third-party apps is a major step toward financial inclusion. This integration improves digital transaction accessibility and comfort, permitting seamless use throughout platforms. For rural communities with restricted banking infrastructure, it’s a major development. The improved interoperability between PPIs and UPI simplifies transactions whereas boosting belief and safety with pre-approved authentication.
According to the RBI, PPIs may be issued by banks and non-banks. Banks can difficulty PPIs after acquiring approval from RBI. The non-bank PPI issuers are firms integrated in India and may function a fee system for issuing PPIs to people/organizations after receiving authorization from RBI.
The cash collected by the PPI issuers is for use to make funds to retailers who’re a part of the acceptance association and to facilitate funds switch or remittance services on behalf of the PPI holders.
India’s flagship UPI is a world success story and an instance of efficient Digital Public Infrastructure. UPI has seen a tenfold increase in quantity over the previous 4 years, from 12.5 billion transactions in 2019-2020 to 131 billion transactions in 2023-2024, or 80% of all digital fee volumes.
In December, the RBI permitted small finance banks to increase pre-sanctioned credit score strains by means of the UPI in an try to develop the attain of credit score on UPI. The RBI has additionally suggested small companies undertake digital fee methods, just like the UPI, to create a digital footprint for his or her monetary transactions, making it simpler for lenders to evaluate the agency’s financials and scale back the credit score hole.
Watch: New age of fee options
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