New PPI guidelines could impact operating margins of mobile wallets in India

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The Reserve Bank of India (RBI) has issued revised guidelines for operation of Prepaid Payment Instruments (PPI) along with making Know Your Customer (KYC) norms stricter for mobile wallet users. In response, digital payment companies have come together to seek changes in some of the proposed guidelines by RBI.

As per the revised guidelines by RBI, digital wallets who follow minimum KYC Format, like verifying the customer with their mobile number, will require to convert themselves into full KYC digital wallet within 12 months from the date of opening. Users who already have a minimum digital wallet account are required to make it a full KYC account by this year end. A minimum KYC wallet can have a balance upto INR 10,000. The amount can only be used to buy goods or services only. Activities such as inter-wallet transfer have been prohibited. Accounts that are under full KYC can have a balance of INR 1,00,000 along with enjoying facilities such as fund transfer.

One of the core areas where digital payment companies have raised a concern is the demand to get a mandatory Know Your Customer (KYC) certificate. Getting such certificate would lead to introduction of interoperability and restrict peer transfers in wallets that are semi-KYC in nature.

It is being regarded that some big players are insisting RBI to implement the requirement of full KYC certification as not all digital wallet companies can fulfil this requirement. On the other hand, the guidelines also laid a restriction on inter-wallet transaction and transfer from bank accounts on semi-KYC accounts. Digital wallet companies believe that implementation of such restriction would destroy the relevance of digital wallet payment system.

Digital wallets have played a major role towards creating an awareness for digital payments. Post demonetization, the popularity of digital wallets has increased at a rapid pace.

According to PayNxt360, the Indian mobile payment market is expected to record a CAGR of 108.4% from 2017-2021 to reach US$ 10,09,737 million in transaction value terms by 2021, increasing from US$ 53,521 million in 2017. In 2016, the market registered a growth rate of 133.7% over 2015, to reach US$ 19,844 million.

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