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RBI to bring interoperability for e-wallets within the promised time frame
March, 06th 2018

The Reserve Bank of India (RBI) is likely to stick to its target of making digital wallets interoperable by April despite allowing payment companies two additional months to comply with its customer verification requirement, said two bankers aware of the matter.

RBI extended its deadline to February for digital wallet providers to meet its full know-your-customer (KYC) norms, which it deems as necessary to eliminate any potential for misuse before allowing people holding holding different wallets to transact.

“Though there are a few details that need to be worked out, the initial timeline promised by RBI should remain the same,” one of the bankers said on condition of anonymity as the matter is still under the purview of RBI. “We could see the regulator clearing wallet interoperability in the coming weeks.”

As per RBI’s master direction released in October, digital wallets were to become interoperable within six months. This would allow users of mobile wallet ‘A’ to make payments to users of mobile wallet ‘B’ and subsequently to bank accounts as well. This will not only improve user convenience but also increase wallet payments to offline merchants as digital wallets would then operate almost like a payments bank account.

Prepaid cards are also expected to be made interoperable as part of this process.

“There will be no distinction made on the basis of the form factor of payments. A prepaid card is just a form of making a payment and… (interoperability) includes both mobile wallets as well as cards,” said the second banker mentioned above. “The priority for RBI is to ensure that consumers are not affected.”

Both the bankers said full KYC and proper identification of users is non-negotiable for the wallet interoperability proposition.

“An interoperable system can grow sustainably only when there is trust between the multiple stakeholders of the process,” said the first banker quoted above. “A few (prepaid payment instrument, or digital wallet) players will be ahead of the others since it is a free competitive market, but overall every player will be on a strong platform.” Until that happens, though, India’s Rs 12,000-crore mobile wallet industry stares at an 80-90% erosion of its user base as most users didn’t submit their details for verification by the February 28 deadline. While there has been tremendous industry backlash against RBI for this, bankers say the increasing incidents of cyber frauds and the rapid growth of the payments industry compelled the regulator to ensure fraudsters are prevented from gaming the system. To minimise stress, RBI has allowed users 12 months to get their full KYC done and multiple ways to get their identification verified. This is expected to allow users time to decide for what purpose they intend to use a digital wallet and how many such accounts they need.

The domestic remittance business of the electronic wallet industry comprising companies such as Oxigen and EbixCash is also expected to be hurt. This industry caters to migrant workers, who have not shown much enthusiasm about getting their full KYC done, say industry executives.

Bankers say this segment of the population can use the business correspondent (BC) channel of banks to continue remittances, using the same agents who were doing this through digital wallets.

“The BC channel brings with it higher reporting requirements and gives greater visibility to RBI and the overall banking sector,” said the second banker quoted above.

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