Interoperability between prepaid e-wallet instruments will soon be a reality

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The Reserve Bank of India (RBI) will be issuing revised guidelines for prepaid e-wallet instruments by 11 October, stated RBI Governor Urjit Patel during the fourth monetary policy release. The new guidelines will focus on encouraging innovation and competition among the players, strengthening safety of operations, implementing interoperability, and improving customer grievance redressals.

The RBI will be issuing revised guidelines for e-wallets by 11 October. New guidelines will implement interoperability between e-wallets for KYC-compliant customers.

The announcement of interoperability in the e-wallet ecosystem was a landmark statement, as it leads to a new paradigm in the payments technology. Interoperability will accelerate the growth of the payments industry that has already been gaining popularity over the last 1 year, owing to the demonetisation exercise.

RBI has clarified that the facility of interoperability will be allowed exclusively for KYC-compliant users. This actually constitutes a small fraction of the overall customer base. The facility is expected to be operative within 6 months.

As of now, leading players in the e-wallet segment such as Paytm, Mobikwik, and Freecharge operate in a closed-loop system, where the movement of money is contained within the mobile wallet network. Although digital payments through e-wallets have been widely accepted in recent times, other options such as payments through debit/credit cards and net banking are extremely popular as well.

Analysts are of the opinion that the RBI’s measure to promote interoperability will not provide a major boost to the e-wallet ecosystem. This is primarily due to the fact that KYC-compliant customers for these companies would only be a small part of the total user base. Even an industry giant like Paytm does not have more than 5 million users who adhere to the RBI guidelines.

To attract users, digital wallet platforms have been offering cashback/discounts when accounts are opened with them. Paytm, backed by Alibaba and SoftBank, has been in the forefront in this regard. Other prominent players like Freecharge and Mobikwik have also adopted similar measures for customer acquisition.

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