Reserve Bank of India (RBI) has introduced guidelines to improve interoperability between mobile wallets. This move is an effort to encourage digital transactions and discourage cash usage. Mobile wallets have so far operated in semi-closed loops, restricting interconnectivity. For instance, funds from the Paytm wallet can’t be transferred to MobiKwik.
Background
In 2017, a roadmap for interoperability of Prepaid Payment Instruments (PPIs) was laid out to be executed in three phases. The phases included enabling interoperability of PPI issued wallets via Unified Payments Interface (UPI), establishing interoperability between wallets and bank accounts through UPI, and achieving interoperability for card-based PPIs via card networks. The RBI has now issued consolidated guidelines to ensure smoother implementation of all these phases of interoperability.
What is Interoperability?
Interoperability refers to the technical compatibility that allows a payment system to function alongside other payment systems. It enables PPI issuers, system providers, and participants across differing systems to perform, clear, and settle payment transactions across various platforms without needing to participate in multiple systems.
Implications
With the introduction of interoperability, users of common payment wallets like Paytm, Freecharge, Mobikwik, PhonePe, and PayZapp, amongst others, can transfer money from one wallet to another. Wallets can attain interoperability through the Unified Payment Interface (UPI). Moreover, the RBI has authorized PPIs to issue cards using recognized card networks such as Mastercard, Visa, or Rupay.
The Benefits of Interoperability
Interoperability benefits users who no longer have to restrict their digital transactions to specific merchants accepting certain wallets. They can now make payments using any wallet to a merchant accepting digital payments. This equates wallets with cards, leading to a significant transition in transactions being accepted across all networks.
About Unified Payments Interface (UPI)
UPI is a consolidated mobile payment system developed by the National Payments Corporation of India (NPCI) and regulated by the RBI. Launched in August 2016, it facilitates instant fund transfer between two bank accounts on a mobile platform without requiring any beneficiary’s bank account details. It merges various banking features, fund routing, and merchant payments into a single mobile application, thus providing a safe, secure method for transferring money between two parties, eliminating the need to transact with physical cash or through a bank.
