RBI has devised guidelines for “prepaid payment instruments” (PPIs) are to be complied with by end of February 2018.
As the norms are very restrictive this may stifle competition in the digital wallet landscape.
What are the norms?
PPIs include mobile wallets such as Mobikwik and Paytm as well as other enablers of digital transactions.
Under these new norms, these will have to fulfil a much larger slate of “know your customer” (KYC) requirements.
PPIs operators will now have to force their customers to undergo a paperwork submission process that will be on a par with that of a formal bank account.
The RBI has also prohibited transactions between wallets, and it has prohibited the transfer of money from semi-KYC accounts to e-wallets.
Such measures are bound to affect new entrants and put the incumbents to comply at an advantage as it involves more paperwork.
The anti-competitive nature of the proposed norms has hence got “Payments Council of India” upset.
What is the way ahead?
The RBI is concerned about laundering and leakage through the new digital payments infrastructure.
But considering that more than 90% of e-wallet transactions are only small-ticket, stringent norms clearly seem uncalled for.
The stringency of KYC norms should be proportional to risk perception and the current RBI proposal clearly seems to be overdoing it.
These norms needs to be withdrawn as such stringent requirements will greatly set back the cause of digital payments and transactions.
Notably, about a decade ago, the RBI had come down strongly against the mobile payments infrastructure.
This killed the development of mobile payments back then in India, while it had flourished over the years in other parts of the world.
