Remember when you could pay your help’s or driver’s salary via Paytm or Mobikwik? Well, you can’t do that anymore. The Reserve Bank of India (RBI) worries that these kinds of transactions through a wallet could be a potential money laundering risk. So, wallets can now be used only to buy goods or services.
Also, remember, you could walk out of a cab even as fares as exact as Rs 183.37 were deducted automatically from a wallet? You can’t do that anymore either. The RBI believes that that kind of a transaction is not secure enough and wallets need to have a system for user consent.
And if you want to make a return flight booking that costs over Rs 10,000 ($154) from a wallet, well, you can do that. But only if you’ve submitted your identity-related documents to the wallet provider. And an agent has physically matched those documents with your originals, in a process called Know Your Customer or KYC.
One by one, the RBI, with its 11 October guidelines for prepaid instruments (PPI), seems to have come after the most-loved features in wallets.
Without a regulatory leash in the past, wallets raced ahead. It went from 53 million transactions in March 2016 to 307 million transactions in March 2017, according to RBI data. In the last four years (the wallet companies got their PPI licenses in 2013), Paytm built a base of 200 million users, Mobikwik got 50 million users, and 30 million went for FreeCharge (now owned by Axis Bank).
A product created by cashbacks, RBI’s two new fate-changing rules on wallets are these:
- Successive transactions need to be authenticated explicitly with customer consent. This could mean that a One Time Password or a fingerprint scan will have to be introduced for unique authentication, explains R Gandhi, former deputy governor of RBI. That makes using a wallet no different from using a UPI app like BHIM or PhonePe (Unified Payments Interface is a new payment standard that lets one send money like sending an email. You only need an email ID-like address).
- Eventually, all wallet users will need to be KYC compliant. This means every user’s original documents need to be verified by an agent, similar to what mobile operators or banks do.
The RBI also allowed wallets to be interoperable. Meaning users could move money between different wallets they owned, and eventually, also transfer money from wallets to bank accounts.
But amidst the gloom and doom of KYC, interoperability so far has been just a good-to-have feature.
The KYC conundrum
The KYC for wallets is irksome because it is costly, time-consuming and it’s as good as acquiring the same set of users all over again.