The Reserve Bank of India (RBI) has issued fresh guidelines for Indian wallet services which finally address the question on interoperability but bring about stringent norms for companies such as minimum capital requirement and KYC mandate, thereby restricting growth. Under the new guidelines, wallet services will be allowed to access interoperable payment systems, if they comply with the eligibility criteria on safety, security, and risk mitigation. Also Read - Using Paytm Transit card you can travel in metro, bus, train and more cashlessAlso Read - Over 600 illegal loan lending apps available on different App stores in India: RBI report
Interoperability between payment systems will essentially allow users to have one wallet account and be able to conduct transactions across other services. The feature has been currently limited to the UPI-based bank apps and had not been extended to the wallet companies. Although the new guidelines indicate that mobile wallet firms will also be allowed to have interoperability, it does not elaborate on the directions. Also Read - Ola reportedly looking to launch IPO early next year: Details here
In addition to the possible access to interoperable payments systems, there are other guidelines which suggest the road is going to get tougher for mobile wallet firms. As per the new guidelines, mobile wallet companies are required to have a minimum net worth of Rs 25 crore and will be required to maintain this base requirement at all times. This minimum capital requirement is five times than before. Earlier, wallet services needed Rs 5 crore minimum of paid-up capital and a minimum net worth of Rs 1 crore. Now, this is expected to compel smaller players to seek fresh funding to be able to meet the guidelines. Wallet services are required to comply with the new requirements by September 30, 2020 for the financial position as on March 31, 2020. Failing to meet the requirement, the wallet services will not be permitted to do further business.
The wallet companies are further required to convert existing wallets which are without KYC to full KYC compliant wallets within a period of 60 days from the date of issue. If the services fail to do so, no further credit will be allowed into the wallets. Currently, wallets without KYC have a limit of Rs 20,000 while the fully KYC compliant wallets can store up to a monthly limit of Rs 1 lakh. ALSO READ: ICICI Bank blocks UPI-based transactions on PhonePe; security concerns over mobile wallets to blame?
Stressing on more security, wallet services are required to submit yearly systems audit report which should cover technology, hardware and compliance systems of systems. The companies have to ensure that separate login is provided for the prepaid payment instrument (PPI) account and that it is not made part of access to other services offered by the service or its associate company or group, etc. For example, if you have a Paytm account, the login credentials for the main account and the recently launched Paytm Mall app should be separate. As of now, while the shopping app allows you to make purchases by paying through bank cards, it asks you to login through your Paytm account if you want to pay through Paytm.
Additionally, wallets have to ensure that their app is not allowed on rooted devices, perform source code audits or give assurance that the app is free from embedded malicious code, subscribe to anti-malware services for tackling malicious apps and websites. Recently, Paytm announced a new insurance cover for its users that helps in claiming money in cases of theft or loss of device. ALSO READ: Samsung Pay contactless payment solution launched in India; here s how it works
Another aspect of RBI s new guidelines puts a limit on the validity of the wallets. All wallets shall have a minimum validity period of just one year from the date of activation and services will be required to intimate users 45 days prior to the expiry of the period. There will be a grace period of at least 60 days. Additionally, those wallets with zero balance for a consecutive period of one year shall be auto-closed by the services with prior notice to users. Now, this comes as a hard blow to both users and companies. Given that Indians are still trying to get used to the cashless lifestyle and security is the prime concern when it comes to using mobile wallets, users often use these apps as a gateway to digital payments and not necessarily keep money stored in it. This regulation is further likely to bring down the number of active users as claimed by companies.
For merchants, the new guidelines require the wallet services to have necessary agreements with the digital marketplace and payment aggregator rather than individual merchants. The companies will have to submit the list of merchants it hosts to the bank and timely update it. ALSO READ: Paytm now lets you add money to wallet with UPI, here s how it works
Finally, the guidelines also tighten the norms on transferring money from wallets to bank accounts. According to the new guidelines, no fund transfers from a mobile wallet to bank account shall exceed Rs 10,000 per month. Now, this conflicts the limits for merchant users. For example, if a wallet service has a limit of storing Rs 1 lakh in a merchant account, and if the RBI guidelines allow them to transfer only Rs 10,000 in a month to their bank account, the security concerns rise up and so does the inconvenience. Industry experts believe that the new guidelines, on the whole, will bring about a negative impact on the digital wallet ecosystem which had only recently picked pace.