By Elton Gomes
The Reserve Bank of India (RBI) will release final guidelines about making digital wallets interoperable by this month. The apex bank also wants major e-wallet companies to enable functions and procedures that will provide for interoperability by the end of June.
With the availability of interoperability, users will be able to carry out transactions regardless of the digital wallets they own. Presently, a Paytm user can only send or receive money through another Paytm account.
As India transitions towards a cashless economy, the popularity of e-wallets seems to be increasing. In fact, a study conducted by investment banking firm Credit Suisse revealed that by 2023, the Indian digital payments market will grow to reach the $1 trillion mark.
The final guidelines on interoperability are likely to come this month. The RBI is working with the NPCI (National Payments Corporation of India) and a few other groups to frame the guidelines,” a banker told Business Line. The RBI wishes to test the process with 10 digital wallets initially.
Here’s what happened
On October 4, 2017, the RBI said in a statement that it will allow private e-wallets to interoperate. Until the announcement, the facility was only available under the Unified Payment Interface (UPI) which was available to some banks and e-wallets developed on the UPI platform.
The RBI said that interoperability within e-wallets will be available within six months after the know your customer (KYC) norms had complied. However, the RBI allotted an additional two months to companies to fully complete KYC procedures.
On March 5, a report in the Economic Times stated that the RBI would stick to its deadline of making wallets interoperable despite allotting the additional two months for KYC verification.
The apex bank extended its deadline to February for digital wallet providers to fulfil KYC norms – which, according to the RBI, are mandatory to keep misuse in check before people can be allowed to own different wallets.
A banker requesting anonymity told the Economic Times: An interoperable system can grow sustainably only when there is trust between the multiple stakeholders of the process. Majority of users reportedly did not submit their KYC details for verification by the deadline of February 28.
However, bankers were of the opinion that KYC requirements are a must to ensure prevention of cyber frauds and online security lapses. Fulfilling KYC requirements were expected to give users time to decide why they intend to use a digital wallet and how many such accounts will they need.
Why you should care
The government’s policies to push digital payments, untimely cash crunches, and easy use make the e-wallets indispensable. Interoperability would certainly lead to a smoother e-wallet experience. In the wake of interoperability, private e-wallet companies will have to work hard towards differentiating themselves from their competition.
Furthermore, customers will now find it easy to handle multiple transactions via a single e-wallet, and they will be able narrow down their preferences.
Interoperability might also attract more investment into the digital wallet industry, thereby, encouraging technological development and innovation. As India continues to be a cash economy, the introduction of policies such as this not only improves the accessibility of digital wallets but makes customers more likely to use them.