After demonetisation in November 2016, many small service providers and merchants began accepting payments through e-wallets. It was a new experience for most of us. But even before this happened, people were already using wallets for person to person transfer of money in instances like sharing an expense among friends. This sort of convenience and ease may however be a thing of the past. The Reserve Bank of India (RBI) recently came out with guidelines regarding issuance and operation of prepaid payment instruments (PPIs). Read those here. The most common PPIs used are e-wallets, prepaid gift cards issued by merchants and prepaid meal passes. We highlight the most common use cases of PPIs and what will change for the consumer.
Ease of opening
The most important aspect of the latest guidelines for consumers is the know-your-customer (KYC) process. The ease with which you earlier opened and used an e-wallet account would not be available for a long time. According to the guidelines, all e-wallet customers will have to be fully KYC compliant within 12 months of opening an e-wallet account.
Sunil Kulkarni, joint managing director, Oxigen Services (India) Pvt. Ltd, an e-wallet company, said one of the main attractions of PPIs was that there was no need to open a bank account for small payments. “In terms of KYC, now it is equal to opening a bank account. For a consumer, a full KYC means that either somebody has to come to his house or he has to go to a retail outlet to do a biometric based e-KYC,” he said.
While you will still be able to open an e-wallet account with a basic mobile one-time password based KYC, the maximum amount you can load in your e-wallet will be Rs10,000 and you will only be able to use this amount for commercial transactions only like paying for a cab or recharging your mobile phone. “Many of us use it for convenience. With these guidelines, you can continue to do these transactions for now, but will need full KYC to do even these after 12 months. Otherwise (if you don’t want to go through the process), use whatever money is there; after that you will not be able to load it anymore without a full KYC,” said Naveen Surya, chairman, Payments Council of India. This can take away the convenience that a user experiences at present. Especially those consumers who do low-value transactions or are infrequent users may not want to go through this extra step of being KYC compliant, he said. Kulkarni said that almost 99% of the 50-60 million e-wallet consumers are only on a minimum KYC level.
How your use changes
Micro payments: You may be paying your regular grocery store through your e-wallet. This transaction is not classified as a merchant payment, but as a money transfer, which is different from making a payment for online shopping or a cab, which are recorded as commercial transactions. Small money transfers were possible with the basic KYC compliant e-wallet. However, this will no longer be allowed after 31 December, unless you are fully KYC compliant. This also means that you cannot transfer money from your e-wallet to your friend’s e-wallet.
However, if you have some amount in your e-wallet today, you will get a one-time option to transfer that money to a bank account, without charge. “That option will be open even beyond 31 December, but it will be only one-time. If you choose to make a partial transfer (of your e-wallet balance), then you will have to use the remaining amount through the e-wallet for some sort of commercial transaction, if KYC is not done,” Kulkarni said.
Transferring to bank account: As of now, you can transfer money to a bank account from your e-wallet without complete KYC, though up to a limit. After 31 December, this will not be allowed without being fully KYC compliant (apart from the one-time transfer allowed to move the money to your already linked bank account). Such transactions are also called domestic remittances. According to Surya, around Rs4,000 crore is transferred using PPIs to bank accounts by migrant workers or others from across India each month. “This set of users won’t be able to do this unless they have a complete KYC. Bank correspondents were traditionally charging 1.9% (of the amount transferred); the PPI industry brought that to 1-1.5%,” he said.
Interoperability: A major take-away from the new regulatory guidelines is that interoperability among e-wallets will begin. Interoperability means being able to transfer money from an e-wallet of one company to another, just as you transfer money from one bank to another. While this is likely to become operational over the next 6 months, you need to undergo a full KYC compliance to avail its benefits.
“What interoperability will do is that if one company goes and signs up a merchant, all wallets can now transfer money to that merchant. That makes for a disruptive business, where e-wallets will have same amount of capabilities for merchant payments at retail points as that of a debit card. So, on the face of it, interoperability may look like you can transfer from one wallet to another, but the real game changer is on merchant transactions,” said Kulkarni.
While becoming fully KYC compliant would mean some effort from you, there are more benefits to enjoy. Infrequent users will also need to go through the process since eventually re-loading e-wallets will also need KYC compliance.