Wallets in India

As to speak and observe, there is quite a lot of buzz which is going around in our country related to wallets, it’s usage, penetration and acceptance in the society. This concept is something which quite a lot of us actually use on a day to day basis, but a very few really understands the difference between one another.

The thing which is covered here is the difference between these wallets and under each of the classifications what all flexibility is given to us as per the compliance and guidelines issued by the RBI.

To begin with, the thing we are talking about is technically known as the PPI(Prepaid Payment Instrument) wherein a consumer loads his kitty with a certain amount in order to ease his payment cycles. PPI’s that can be issued by a given organization(post the license, if applicable) are classified into three types :

  1. Closed System : Under this system all the transactions are meant to be done in the ecosystem of the issuing agency. This means, once you add money to this wallet, the value can be redeemed only against the services provided by that organization.
    As the money added cannot be used to avail any third party services, the issuance and operations of such instruments are not required to undergo any approval or authorization by the RBI. 
    For eg.: BookMyShow Wallet, Chai Point Wallet, Freshmenu Wallet etc.
  2. Semi Closed System : Now, if you go one level up from the closed system, here the money that you are adding can be used to avail services from the merchants or establishments that recognizes the wallet issuer. This contract of the merchant can also be with the payment gateway / aggregator through which the money can get routed from the wallet. 
    As per the RBI regulations, the value present in the wallet cannot be used to withdraw cash. The same holds true, if the issuer is a bank or a non banking PPI license holder. 
    For eg.: PayTM Wallet, Mobikwik Wallet, Freecharge Wallet etc.
  3. Open System : So, if you now go one notch up the semi closed wallet, open system comes into place wherein the moment of money from the wallet can be used to avail services at any of the merchant outlet. 
    This can be issued only by a bank and the same is responsible to take care of the money withdrawal aspect as well.
    For eg.: M-Pesa by Vodafone jointly with ICICI Bank Ltd. etc.

Will keep on updating the space with more and more information in order to cover a lot of ground related to the payments space.

Hoping, the next time anyone loads their wallet they know where the money is going and what all is technically and legally possible with that money.

Cheers !!