What are prepaid payment instruments?

Prepaid payment instruments (PPIs) come with a pre-loaded value and in some cases a pre-defined purpose of payment. They facilitate the purchase of goods and services as well as inter-personal remittance transactions such as sending money to a friend or a family member.

These payment instruments are licensed and regulated by the Reserve Bank of India. There are three types of PPIs—closed system PPIs, semi-closed system PPIs and open system PPIs.

The most common example of a closed system PPI is a brand-specific gift card. Such cards, physical or otherwise, can be used only at specific locations, and cannot be used to transfer funds from one account to another.

Among, semi-closed PPIs, e-wallets like Oxigen and Mobikwik are a common example. These are not restricted to a single entity. Instead, these can be used for purchase of any kind of goods and services from a merchant, as well as to transfer money to someone.

The open system PPIs can be issued only by banks and can be used at any merchant outlet for any purchase or even cash withdrawal. A travel card is a type of open system PPI. It can be used for all types of spending and for cash withdrawal from ATMs.