Besides promoting the Digitisation Campaign in the country, RBI has to further judge and pass necessary guidelines for digital companies for the safety of the citizens. Since there has been an unprecedented escalation in the number of users for digital wallets post demonetization, RBI has become a keen watchdog for supervising companies by regulating amendments and new drafts from time to time.
In a similar attempt, the central bank issued new robust guidelines for the digital wallets to adhere. These fresh rules were passed late on March 20 and has raised minimum capital requirement for digital wallet providers to Rs 25 crore. The amount presented in the latest issued directions is 5 times the previous minimum capital requirements. Moreover, full compliance with Know-Your-Customers (KYC) norms has been mandated coupled with the introduction of limitations on domestic remittances.
Expressing his concerns over the guidelines, Vijay Shekhar Sharma, Founder, Paytm spoke to ET and said,
Payment banks and traditional banks will have an advantage since they have to do KYC anyway , but for stand-alone wallet companies, the cost of acquisition will become higher, If KYC is mandated, there should be unlimited money flow between a KYC wallet to a bank account. The proposed limits could be reviewed.
This means wallet companies are still competing for their share of the market and their growth will receive a setback. Adding to that, most of the transactions for standalone wallet companies involve small amounts of money and generally do away without KYC requirements. With the compulsion of KYC, the large part of business for these companies will get throttled up and thus impact their survival.
However, it may also prove beneficial for companies who’re catering to the migrant population with their remittance and wallet-based services. RBI also noted that a digital wallet provider has to comply with the KYC requirements within six months of a customer opening an account with it, which provides a certain time relaxation to the companies.
Apart from these limitations, RBI has also opened up new business areas to be explored by digital payment solution providers. These include cross-border inward remittances allowance into mobile wallets and interoperability (still in process) .Furthermore, the RBI has reasoned out hundreds of inactive PPI license holders in the country for increasing its minimum capital requirements. However, this also possesses a threat for small yet active companies.
Speaking in the same context, Doshi of PayPoint said,
If these norms are enforced, we will have to raise fresh funding within the next two years to be able to meet the capital requirements by 2020.
Industry experts feel that only 8 out of 10 existing licence holders will be able to meet the increased minimum capital requirements. Though with RBI working on interoperability will assist the serious players to further expand their approach in the country. It would channelize payments from one wallet to another and will dismiss the need for banks to act as an intermediary.
Voicing his opinion on the matter, Jitendra Gupta, MD, PayU India said,
If one wallet user is moving money to another smaller wallet, that company should be a player serious enough to be able to credit his account instantly because the real settlement of funds from the former will take time, hence the higher capital requirement.
He also added that automatic wallet closing of accounts with zero balance will gear up the digital payment sector in India. There are many users which open a wallet for free rewards and coupons and conclude their services with the end of the offer period. Such wallets should be closed by default which would drastically reduce the number of actual users in the records. By enforcing this rule, the RBI will be able to weed out those numbers and bring out actual figures around how many wallets are actually there in the system.
Yet another alteration is a reduction of the monthly limit of the transaction to Rs 10,000 from Rs 25,000 in the wallet-based domestic remittance business. Wallets like Oxigen and PayPoint specifically depend on such transactions and a decision like such would certainly result in a negative growth. The new guidelines hence include various unintended impediment clauses which will have an adversarial impact on the wallet ecosystem.
Sameer Nigam, Chief executive of PhonePe, the digital payments arm of Flipkart, said,
Full KYC is a deterrent, these payment gateways will resist sharing this list with the wallets.
