Apr 082017

RBI to now open up UPI for digital wallets like Paytm and MobiKwik

The RBI has announced a policy to integrate the digital wallets like Paytm and MobiKwik in the UPI payment system and make them inter-operable. This step will end the dependency of each platform and will allow users to make cashless transactions across several digital wallets, conveniently. The UPI framework opening will allow the wallet users to accept money from Paytm to their PhonePe account or send money from MobiKwik to Paytm, directly. This will expand more scope for the general masses to involve in more digital payment systems and bring a less-cash economy in the country. After the demonetization policy of the Modi Govt. in the November, 2016, Indian masses are getting used to these digital wallets and are using them for their daily transactions, regularly. So integration of all the wallets will help the peers to get more involved.

RBI to now open up UPI for digital wallets like Paytm and MobiKwik

Unified Payment Interface for digital wallets

The UPI transaction system has been widely used for money transfer from one bank account to other, with the help of a smart phone. Almost all nationalized banks have their own UPI apps for their valued customers which will help them in making digital transactions. One can make direct payments to merchants or pay utility bills. One can make direct bank transfers through the UPI payment system. Now, integration of the digital wallets like Paytm, MobiKwik, PhonePe, FreeCharge, etc. in this network will boost up business for both the wallet companies as well as help govt. in achieving more digital transactions among masses. At present, the digital wallets can only use the UPI system via a partner bank but does not have direct access to the system.

 Granting permissions of inter-operability to the digital wallets

The RBI is chalking up the working plan under which it will provide inter-operability to all the major digital wallets operating in India. This means, the wallets will tend to become platform independent and users of one digital wallet can transact with another user of separate digital wallet. This inter-operability will be achieved through the UPI payments procedure. As per internal reports, the RBI will grant the permissions for the digital wallets to join the inter-operable UPI platform, within the next 2 – 3 months. The move will be highly beneficial to all the digital wallet operators also as they will be able to grow their business more easily. Below are some of the steps which will be taken by RBI in the upcoming months to bring the digital wallets under the UPI umbrella:

  • Necessary guidelines will be issued by the RBI for all the wallet agencies operating within India for the inter-operability in the UPI framework. The digital wallets must follow those guidelines to become members of this big change.
  • Guidelines on the KYC documents for the digital wallets’ users will be issued shortly. As the UPI transactions involve direct bank to bank transaction, so KYC documentation is must. Till now, the digital wallet companies did not pushed for KYC documents from customers. Now, it will be mandatory for each company to get details of each and every customer by collecting and verifying their identity proof, address proof, etc.
  • There should be some interchange fees which will be applied on the wallets for opening up the inter-operability on the UPI framework. This interchange fees will be soon decided by the RBI and those wallet agencies who will take part in this system must adhere by these regulations.

Why inter-operability will be beneficial for the wallet operators?

This will be a great chance to open up for all the digital wallet agencies and shed down their platform dependency. The wallet companies have already shown their keen interest and welcomed the RBI’s initiative to allow the digital wallets to operate on the UPI network. This will be a win-win situation for all the wallet companies as they will not need to register both the customers as well as merchants under their platform. The inter-operability will definitely result in expansion of market and the wide promotion of digital payment ecosystem.

Collaboration of banks and wallets to stay

As the recent RBI move will make the wallets more independent, but this will not mean that the bank wallet relation will end up easily. The dependency of the wallets on the collaborated banks will surely reduce but will not terminate entirely. This is because, the movement of the money will still continue through the partnered banks. Also for other aspects like grievance redressal, settlements, reconciliation activities, the digital wallet agencies will need the help of the banks. Alternatively, the banks also need these wallets for getting more customers under their digital payments radar as these wallets have strong innovative technical teams which will be needed to making the system more stable. Several researched show that more transactions were recorded in digital wallets, compared to the UPI apps of banks. So the idea of collaborating the digital wallets with the UPI system will be a great initiative to achieve a less-cash economy.

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