BackStricter norms for e-wallets likely soon
The Reserve Bank is seeking the public's comments on regulations relating to prepaid payment instruments such as e-wallets. Here is what it proposes for now
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When the Reserve Bank of India (RBI) issued draft master directions on issuance and operation of prepaid payment instruments, the underlying theme was security and customer protection. If these draft guidelines turn into reality, here is what it would mean for your e-wallet and gift cards.
PAN or Aadhaar may become mandatory: So far, if you opened a new e-wallet, you did not have to provide any identity card details. You could just provide the minimum details such as mobile number, email ID and create a password to load money and transact. As part of the Know Your Customer (KYC) process, e-wallet companies usually sent out a one-time password to verify your mobile number and once verified, you could start using it. In the draft norms, RBI wants you to provide a unique identification number an ‘officially valid document’. “RBI wants to avoid misuse of e-wallets for money laundering or fraud. The unique identification number could be in the form of PAN or Aadhaar number," said Jitendra Gupta, managing director, PayU India. Thus, soon you may have to provide your PAN or your Aadhaar details while opening an e-wallet.
Full KYC for all e-wallets: RBI also wants e-wallet accounts to be converted into fully KYC-compliant accounts within 2 months of opening the e-wallet account. If full KYC is not done, no further credit would be allowed. If you have any balance in the wallet, you will be allowed to use the balance. As of now, full KYC is not mandatory, up to a certain amount. In the draft guidelines, RBI has asked e-wallet companies to convert all the existing minimum detail, semi-closed, prepaid payment instruments (PPIs) into full KYC-compliant accounts by 30 June. The companies are to communicate this to the customers and also give them a one-time option to transfer the existing balance to another wallet—of the same e-wallet issuing company or to a bank account—without any transaction limit. There will be no charge for such fund transfers.
No more paper vouchers: Some prepaid payment issuing companies such as Sodexo offer paper-based vouchers. In the draft guidelines, RBI wants to do away with such vouchers. The companies can now issue vouchers only in electronic forms such as: smart cards, magnetic-strip cards, internet wallets and mobile wallets. “Entities presently issuing meal vouchers under B2B arrangements in paper voucher form shall commence issuance of such PPIs in electronic form, including cards, at the earliest, but not later than 31 December," RBI said in the circular. Prepaid meal instruments in paper-based voucher forms will not be accepted beyond 31 December.
Zero balance accounts: In case you have zero balance in your e-wallet for one year at a stretch, it will be closed automatically by your e-wallet service provider. You will be informed before the e-wallet is closed and will also be given the option to close the e-wallet or transfer the balance as per the applicable limits.
Additional-factor of authentication: RBI has also suggested that prepaid payment issuers are to provide additional factor of authentication for authenticating transactions, including where the PPI is issued in the form of cards. “I think we should first should assess what the RBI is saying. The big question is whether wallets are vulnerable. I think security is important even at the expense of convenience," said Abhijit Bose, co-founder and chief executive officer, Ezetap Mobile Solutions Pvt. Ltd.
Putting customer first: RBI suggests that e-wallet and gift card companies are to disclose the terms and conditions in clear and simple language, including: fees, expiry date, customer service telephone numbers, a toll-free number and website URL where available. E-wallet and gift card companies have also been asked to appoint nodal officers to handle customer complaints and grievances. When complaints or grievance do crop up, an action has to be taken within 48 hours and they have to be resolved within 30 days from when such complaint or grievance were reported.
Interoperability to be allowed: “Entities meeting the revised eligibility criteria and adhering to other instructions—such as on safety, security and risk mitigation—contained in these directions shall be allowed to participate in other interoperable payment systems, as and when specific directions are issued in this regard," said RBI in the circular.
Prepaid gift instruments: As of now, cash withdrawals as well as fund transfers are not permitted for such instruments.
“However, PPI issuers shall permit transfer of outstanding balance in the PPI to ‘back to source’ (payment instrument from which the PPI was loaded) in case the purchaser requests it," said RBI the circular. KYC details of purchasers of such instruments shall be maintained by the PPI issuer, and made available on demand.
Takeover permission: In the draft guidelines, RBI said that non-bank PPI issuers should get prior written permission of the central bank if they want to takeover or acquire a non-bank entity, which may or may not result in change of management and also if there is any change in the management of the non-bank entity, which would result in change of more than 30% of the directors, excluding independent directors. “A lot of companies were acquiring PPI-licenced entities in the last couple of years. So far you didn’t need a permission to acquire a PPI-licensed company. This will have an impact on future deals," said Gupta.
The apex bank has put the draft guidelines on its website for comments till 31 March.
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