New Delhi: With the Reserve Bank of India (RBI) releasing operational guidelines on interoperability of prepaid payment instruments (PPIs) on Tuesday, mobile wallet users will soon be able to transfer funds from one wallet to another and, eventually, from their wallets to bank accounts through the unified payments interface (UPI) platform.

It will also allow mobile wallets to issue UPI handles and cards. This will enable non-bank prepaid payment instruments (PPIs) to act as quasi-banks in terms of payments, increasing tension between mobile wallet companies and payments banks, said industry experts.

“Card networks are allowed to onboard PPI issuers... Non-bank PPI issuers are permitted to participate as members/associate members of authorised card networks," said the RBI guidelines released on Tuesday.

By allowing PPIs to issue cards for withdrawals, mobile wallets will be almost on par with payments banks. The only difference will be that payments banks will pay interest on deposits, while wallet balances will not yield any return, said an industry expert, requesting anonymity.

“From a business perspective, the wallet companies will need to figure out how to use interoperability to develop different use cases. It is definitely a progressive step and we need to see how wallet operators can build on this and how this might eventually impact the idea of payments banks. The cost of entry into a new industry is likely to get lowered," said Ashish Aggarwal, senior director and head of public policy at Nasscom.

In August, some payments banks had approached RBI to voice their opposition to mobile wallet interoperability as it could directly affect their business models, and put them at a disadvantage.

Payments banks will have an edge over wallets on deposit amounts and the interest paid. While payments bank customers can retain deposits of up to 1 lakh in their accounts, for full-KYC wallets, the total amount loaded in a month cannot exceed 10,000 (annual amounts are limited to 1 lakh).

According to Sunil Kulkarni, joint managing director at Oxigen Services (India) Pvt. Ltd, an e-wallet and payment solutions company, there has been a fundamental change in wallet businesses with the permission to join UPI and card networks, which will speed up digitization offline and online.

“It would have been great if full functionality of UPI was granted to wallets. Currently, UPI application of banks allow the users to add other bank accounts on the same app, but wallet users will not be able to transact directly from other bank accounts. We hope that in the next phase, this is also enabled," said Kulkarni of Oxigen.

The RBI also said that in cases where PPIs are issued in the form of wallets, interoperability across PPIs shall be enabled through UPI. Where PPIs are issued in the form of cards, the cards shall be affiliated to authorized card networks.

Last October, RBI had issued a directive to banks and PPIs on interoperability, which was to be enabled in a phased manner. It had also said that operational guidelines on this would be issued separately.

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