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NEW DELHI : Cred, a credit card bill payments platform, is set to enter the wallet payments business by acquiring liquor delivery startup HipBar Pvt. Ltd, which owns a prepaid payment instrument (PPI) licence, three people aware of the development said. The PPI licence, granted by the Reserve Bank of India (RBI), permits companies to operate payments systems such as digital wallets, pre-paid transit cards, vouchers and so on. The RBI website lists 37 entities that hold the licence as of this month. HipBar was granted the licence in August 2016.

According to filings with the Registrar of Companies, Cred founder Kunal Shah and his brother Rohan Shah Naresh have joined the board of HipBar as directors on 12 October. Only one of the erstwhile HipBar founders—Prasanna Natarajan—is still a director.

A Cred spokesperson confirmed that the company is close to acquiring an existing PPI service provider without naming the startup. Natarajan did not respond to queries.

However, one of the three people cited above said Cred acquired the payments business of HipBar. As a result, about 10-15 people from HipBar will join Cred, the person said, requesting anonymity.

“While there is no regulatory approval required for acquiring a PPI, the regulator has been informed of the change in control, and the process has been set in motion," the person said.

How RBI views the acquisition of companies with a PPI licence and whether the transfer of licence to the acquirer is deemed automatic is unclear.

HipBar’s app allows consumers to buy a range of alcoholic beverages and pay using its wallet. In 2018, United Spirits Ltd, part of global spirits major Diageo, invested 27 crore in the startup for a 26% stake. However, in July, USL sold its entire stake in HipBar at a 98% loss back to Natarajan for 52 lakh.

Several fintech entrepreneurs, who are exploring the neo-banking space in India, are eyeing a PPI licence as it becomes challenging for neobanks—entities that rely on banks to offer services—to work with lenders because of compliance and competition issues.

But things are expected to change with the new RBI guidelines for wallets. Fintech entrepreneurs believe that a PPI licence will allow them to operate almost like a bank.

New rules for PPIs announced by the RBI in April doubled the limit for money that can be loaded in a wallet to 2 lakh and made interoperability between wallets mandatory by March 2022.

Wallet companies were also given access to payment systems such as real-time gross settlement and national electronic funds transfer, which were previously used for interbank transfers only. This has greatly enhanced the utility and value of a digital wallet licence.

Wallet users are also allowed to withdraw cash from ATMs. In August, RBI issued directions on PPI with fresh clarifications. It notified that “no entity can set up and operate payment systems for PPIs without prior approval/authorisation of RBI."

The master directions classify PPI into two categories—small PPI and full-KYC PPIs. Small PPIs are issued by banks and non-banks after obtaining minimum details of the PPI holder. They can be used only for the purchase of goods and services. Funds transfer or cash withdrawal from such PPIs shall not be permitted, whereas full-KYC PPIs can be used to purchase goods and services, transfer funds or withdraw cash

Kunal Shah has been known to harbour neo-banking ambitions. According to a former employee, Shah is a keen observer of Brazil-based Nubank and has spoken about emulating its business model.

With the marketplace, payments and PPI in place, Cred, which claims to have more than 6 million users, is set to expand its neo-banking services.

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