Vision-2018 envisages promoting interoperability in areas which have a high potential for driving electronic payments, including for small value transactions," the Reserve Bank of India (RBI) said in a document, Payment and Settlement Systems in India: Vision-2018 released on 23 June 2016. To realize this vision, the central bank released operational guidelines on interoperability of prepaid payment instruments (PPIs) on 16 October to enable PPI users, including mobile wallets to transfer funds from one wallet to another and, eventually, from their wallets to bank accounts through the Unified Payments Interface (UPI) platform. Mint examines these guidelines, their impact on mobile wallet companies, payment banks and consumers.

Onus on KYC compliance

The guidelines put the onus on compliance with know-your-customer (KYC) norms on the PPI issuers in order to become interoperable. The move is aimed at ensuring transactions are traceable in case a dispute arises. However, this comes at a time when there is no clear mechanism in place for PPI issuers including mobile wallet firms to verify its customers online. A five-member Constitution bench of the Supreme Court on 26 September barred private companies from accessing Aadhaar details of consumers, affecting telecom operators and wallet companies who had been using the biometric database for instant electronic verification of would-be subscribers. Currently, these firms have stopped doing Aadhaar-based authentication but do not have clarity on alternative available to them. Most experts say that verifying customers online without accessing the Aadhaar database would mean returning to the offline model, where once the physical documents are submitted by a customer, the firm ships it to the verification centre and calls up the customer to cross-verify details. There is also a need for RBI to update its KYC guidelines for entities regulated by it, which includes banks and PPI issuers as the current guidelines emphasizes on Aadhaar based KYC.

No timeline set for implementation

RBI has not specified any timeline for implementation of interoperability guidelines which are to be enabled in three phases. In the first phase, interoperability of PPIs issued in the form of wallets will be introduced through UPI. In the second phase, interoperability between wallets and bank accounts through UPI would be introduced and eventually in the last phase, interoperability for PPIs issued in the form of cards would be implemented through card networks. “PPI issuers operating exclusively in specific segments like meal, gift and mass transport system may also implement interoperability," it said. However, no specific date or timeline for implementation of these phases have been mentioned by the central bank.

According to a CEO of an e-wallet company, who did not wish to be named, RBI took almost a years’ time to release these guidelines. It would not be wrong to say that the implementation of all three phases might take several years. To be sure, RBI issued a directive to banks and PPIs on interoperability in October last year where it said that operational guidelines would be issued separately.

Lack of clarity and preparedness

The PPI industry is still not clear on the procedure for implementation of interoperability. While the requirements to enable interoperability in different phases have been outlined clearly, the process to go about it has not been discussed at all.

According to a payments expert who declined to be named, the guidelines also do not contain any contact that the industry can connect with in case any clarification about the guidelines is needed.

“National Payments Corp. of India (NPCI) should be coming out with the next step," said another expert, also declining to be identified.

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