
The Reserve Bank of India (RBI) has introduced significant updates to the Unified Payments Interface (UPI) system. These changes now allow users to make payments using third-party mobile applications through the wallets of companies providing prepaid payment instruments (PPIs). According to a circular issued on Friday, PPI users who have completed their KYC process can access this feature.
What Are Prepaid Payment Instruments (PPIs)?
PPIs, or the wallets or prepaid cards, allow users to deposit money in advance, which can be used to make UPI transactions as well as other online payments without having to draw directly on a bank account. Till recently, all these payments were restricted to the UPI platforms offered by the same company that was handling the PPI.
The Game-Changing Update
Under the new RBI directive:
- Any UPI application can now be linked to PPIs.
- Payments using wallet funds can be made via third-party UPI apps.
- PPI credentials would be required for linking wallets with UPI apps.
Example: Users who have balance in their PhonePe or Paytm wallet can now use that amount to pay for other UPI applications; thereby breaking the exclusivity which tied users to a particular UPI platform.
Ease for Digital Payment Users
This update simplifies the process for users of gift cards and metro rail cards and makes digital wallet users. Because the new rule has interoperability across UPI applications, it has allowed users of digital payments to experience flexible and seamless payment services offered. It gives the individual an opportunity to use balance from one wallet in multiple schemes without any form of limitations.
Such moves only augment the RBI's efforts on enhancing the digital payments' ecosystem, encouraging innovation to improve user convenience.