Prepaid cards for overseas payments
This month, when the Reserve Bank of India (RBI) released new guidelines for e-wallets and prepaid instruments (PPIs), it allowed some e-wallets and prepaid cards to be used for international transactions. However, there remain many limitations.
E-wallets that can be used
First, only those e-wallets or prepaid cards can be used for international transactions that are provided by banks . Hence, an e-wallet providers such as Mobikwik or The Mobile Wallet cannot provide their products for international transactions. Also, only semi-closed or open e-wallets can be used for cross border transactions. Let’s explain them.
Currently, there are three categories of e-wallets—closed, semi-closed and open. With a closed wallet, you can buy goods and services exclusively from one company only. With semi-closed wallets, you can buy goods and services at specified merchant locations only, that already have a specific contract with the issuer to accept the payment instruments. On the other hand, open wallets can be used to purchase different goods and services and also withdraw cash .
Above all, if you want to use an e-wallet for international transactions, you have to be Know Your Customer (KYC) compliant as well.
While being able to make international transactions is a convenience, this facility comes with multiple limitations. The RBI allows you to use the card or e-wallet only for purchase of goods and services. This basically means you can use these to do online shopping only; you cannot use the e-wallets and prepaid cards to remit money to any individual overseas.
You cannot use these for fund transfers or to send money under the Liberalised Remittance Scheme.
Also, to be able to use this service, the e-wallet or the prepaid instrument has to be enabled with international transaction facility. For this, as a customer, you have to request your bank to enable it.
Other than the limitations on the types of transactions on e-wallets, there are limits on the transaction amount too. For instance, you cannot spend more than Rs10,000 per day and you can spend only up to Rs50,000 per month for doing international transactions.
Since prepaid instruments can be offered in the form of e-wallets or cards, if the bank is providing these prepaid cards, then it needs to have the Europay, Mastercard and Visa (EMV) chip and needs to be personal identification number (PIN) compliant.
What it means for the customers
So far, prepaid cards and e-wallets could not be used for international transactions, except in the case of foreign exchange prepaid payment instruments.
With this move, you will now be able to use your money in the e-wallet, at least, to pay for online purchases on international websites.
This will be useful for those who do not want to use their credit or debit card for international transactions for security reasons.
You can now simply load the required amount in the prepaid card or your e-wallet and do the transactions without exposing your bank account or depleting the credit card’s limit.