MUMBAI: The Reserve Bank has allowed the popular unified payments interface (UPI) access to prepaid payment instruments (PPIs) through third-party applications, making it easier for users to link their digital wallets to UPI-enabled apps, which will go a long way in making banking more accessible.
In a circular issued to all prepaid payment instruments issuers such as banks and non-banks, the National Payments Corporation (NPCI) and system participants on Friday, the central bank said henceforth, all prepaid payment instruments (PPIs) can access the UPI through the third-party applications.
Currently, UPI payments from/to a bank account can be carried out using the UPI application of that bank or of any third-party application provider but UPI payments from/to a PPI can only be carried out using the mobile application provided by the PPI issuer only.
The central bank had said in the April 2024 that it would enable UPI payments from/to full-KYC PPIs through third-party UPI applications.
The move will enable PPI holders to make/receive UPI payments through the mobile application of third-party UPI applications, the regulator said, adding the relevant provisions in this regard have been amended in the master directions August 27, 2021 on prepaid payment instruments.
The revised master direction requires that to achieve interoperability through UPI, the PPI holders shall be on-boarded for UPI by their own PPI issuer only. PPI issuer shall only link its customer wallets to the handle issued to it. PPI issuer as PSP shall not on-board customers of any bank or any other PPI issuer.
Also, authentication shall be completed by the PPI holder as permissible according to her/his existing wallet credentials. In other words, a transaction will be pre-approved before it reaches the UPI.
A PPI issuer shall enable holders of only its full-KYC PPIs to make UPI payments by linking its customer PPIs to its UPI handle and that UPI transactions from PPI on the issuer’s application shall be authenticated using the customer’s existing PPI credentials. Such a transaction will, thus, be pre-approved before it reaches the UPI system.
However, a PPI issuer, in its capacity as a PSP, shall not on-board customers of any bank or any other PPI issuer but only facilitate discovery of its full-KYC PPIs on third-party UPI mobile applications, who, in turn, shall enable such PPIs to be linked to their PSP handle. Such UPI transactions, from PPIs using third party UPI applications, shall be authenticated using the UPI credentials.
Commenting on the much-expected development, Ankush Julka, of Mufin Pay, told TNIE that the central bank enabling PPIs to access UPI services via third-party applications brings greater flexibility and accessibility to the digital payments ecosystem, and will significantly impact how consumers use digital wallets.
“One of the main challenges with PPIs has been their limited compatibility with mainstream banking services and payment platforms. By integrating PPIs with UPI, the RBI has addressed this issue, making it easier for users to link their digital wallets to UPI-enabled apps,” he said.
This access will not only improve user experiences but also provide more convenience for our customers. That apart it will also make transactions smoother, whether it’s paying bills, shopping online, or transferring funds, which is crucial for encouraging wider adoption of digital payments, he added.
“The ability for users to link full-KYC PPIs to third-party UPI apps means customers can choose from more platforms for their transactions. This flexibility is important for improving customer satisfaction and increasing engagement with digital wallets,” he said.