The Reserve Bank of India (RBI) on Wednesday announced its decision to make interoperability mandatory for all full-KYC prepaid payment instruments (PPIs) and other payment infrastructures. The regulator simultaneously announced an increase in the authorized outstanding balance of PPIs to Rs 2 lakh from Rs 1 lakh and authorized cash withdrawals from non-bank wallets at full KYC. The regulations effectively put portfolios on the same level as bank accounts in terms of service offerings.
RBI Governor Shaktikanta Das has expressed his displeasure at the lack of effort by industry players to move voluntarily towards interoperability. The central bank had published guidelines in October 2018 for adopting interoperability on a voluntary basis for full KYC PPIs. As the migration to interoperability has not been significant, Das said, it will now be mandatory for full-KYC PPIs and for the entire payment acceptance infrastructure.
Currently, cash withdrawals are only allowed for full-KYC PPIs issued by banks. Allowing cash withdrawals from all PPIs, in conjunction with the interoperability mandate, will stimulate migration to full KYC PPIs and also complement the acceptance infrastructure at Level III-VI centers, a said the RBI. In addition, the centralized payment systems (CPS) managed by the RBI – RTGS and NEFT – will be open to non-bank payment system operators such as PPI issuers, card networks, white label ATM operators. and Trade Debt Remission System (TReDS) platforms. The measure aims to minimize the risk of settlement.
Responding to a question about data breaches at non-bank PPIs and the role of the RBI oversight architecture, Executive Director T Rabi Sankar said the regulator’s goal would always be to protect the customer and to make transactions as secure as possible. “To that extent, as we have done recently to banks, we are considering issuing guidelines that could establish basic minimum standards for cybersecurity and other security concerns. With regard to examples of such problems, we are seized of these questions and we are taking all necessary measures to reduce the possibility of such events, ”he said.
Manoj Chopra, vice president and director – products and innovation, InfrasoftTech, said interoperability could help wallets reclaim the space they had lost to banks and other players with the rise of l unified payment interface (UPI) and the new KYC requirements. “The cash back rewards offered didn’t help much either. Interoperability will provide that much needed push for portfolios and PPI providers, ”said Chopra, adding that the transition would be fraught with risk. Customers will need to pay more attention to digital fraud, and wallet providers will need to strengthen their technology infrastructure to be able to manage these risks.
As the wallets are activated with most of the transaction functionality available on bank accounts, they will be able to effectively compete with the micro-economies of the underbanked segments, said Ketan Doshi, MD, PayPoint India.