Earlier this week, RBI announced plans of opening up the Unified Payment Interface (UPI) for the widely used digital wallet services in the country. This move will allow inter-wallet transactions and assist the government to further advance its digitization campaign. But the interoperability allowance is not as easy as it seems, especially the capital requirements concerned with the project.
Since all the PPI (Prepaid Payments Instrument) licence holders do not channelize the same level of technology and work on different security models with the given relaxed capital. RBI has to comprehensively examine each segment involved in the e-wallet sector. Two sources aware of the matter spoke to ET and stated,
Since interoperability between wallets has to be brought about, RBI is thinking of relooking into the capital requirements for a PPI licence, and also reviewing the threshold limit of transactions to become a wallet player.
Presently, there are 53 PPI license holders in the country. However, most of them are inactive and have failed in acquiring merchants and processing big-figure transactions. They either lack the marketing skills to engage the audience or provide inadequate security measures. Only a couple of digital wallets, namely Paytm, Mobikwik, and FreeCharge among others are popular in the current market scenario. Speaking in the same context, a top executive of a payments company said,
Once there is interoperability between such players, I am sure there’s a need to check on the level of activity of the players, otherwise it could turn out to be an administrative headache to manage so many entities,In the current scenario, top five to six wallets are showing 90% of the transactions.
In India, PPI license is granted to any company having a minimum paid-up capital of Rs 5 crore along with a minimum positive net worth of Rs 1 crore. These relaxed net worth criterion presented by the government have helped a lot of niche players in the market, but they lose grip after an initial stroke. If there are no serious players in the game, then managing so many dormant entities could pose serious regulatory challenges for the licensing department and RBI as well.
Bharat Bill Payment (BBPS) and Trade Receivables Discounting System (TReDS) are among the handful digital payment solution companies which are operating interoperable systems. The regulatory norms in India mandate such companies to confer a minimum capital requirement of Rs 100 crore. Moreover, the ministry of electronics and IT has recently issued a draft detailing cyber-security guidelines for mobile wallets. These guidelines will subject the digital wallet companies to a strong security scrutiny.
Adding to that, the anonymous top executive of a payments company said,
I believe there’s a need for balance between security and ease of business because wallets are catering to very small value transactions and strict norms of full KYC and others could make it difficult for the lowest sections of the economy to adopt the solutions.
