RBI MPC: Prepaid payment instruments to be permitted to use third-party UPI apps for making payments

PPIs are instruments that can be used for making payments against the value stored in them. Mobile wallets and e- gift cards are examples of PPIs.

Prepaid payment instruments (PPI) will be permitted to be linked with third-party UPI applications, RBI Governor Shaktikanta Das said in his April 5 monetary policy statement. This will enable PPI holders to make UPI payments just like those with bank accounts do. Details on how it will work will be shared shortly.

PPIs are instruments that can be used for making payments against the value stored in them. Prepaid cards are a PPI that can be loaded with a certain amount that can then be used for specific payments (such as with Sodexo meal cards) or for any payment (such as with bank prepaid cards) either at merchant outlets or e-commerce websites.

At present, prepaid cards can be used to make UPI transactions only by using the application (app) provided by the PPI or prepaid card issuer itself. The PPI issuer can be a bank, or a non-bank entity such as PhonePe, Pay U Payments, One Mobiwik Systems, to name a few.

What the RBI is proposing is that prepaid cards be permitted to be linked with third-party UPI apps such as Google Pay, Amazon Pay, PhonePe, etc for making payments. This aim is to provide greater payments convenience to prepaid card users.

Parijat Garg, a fintech consultant, takes the example of Pluxee meal cards (formerly Sodexo meal cards) that many companies give to their employees to make his point.

“Currently, if I want to use my Pluxee meal card say at any retail store, I must either carry the actual card with me or otherwise use the Pluxee app to make a payment. After the RBI announcement is implemented, I will be able to link my Pluxee pre-paid wallet with any third party UPI app such as Google Pay or PhonePe etc. to make the same payment” explained Garg. Likewise, for corporate gift cards.

He further added, “Then, like I use my bank account linked with my UPI app, I can instead use the balance in the Pluxee wallet or any such PPI wallet to make the permitted payments.”

Talking about the broader impact of RBI’ proposal on linking of PPIs with third party UPI apps, Mandar Agashe, Founder & MD, Sarvatra Technologies, a banking tech company that enables payments systems for UPI, said, "In the non-urban towns and rural areas, there are still many PPI issuers that do not provide UPI payments facility to their customers. However, with the proposed capability to connect PPIs to any third-party UPI app, these individuals will gain the ability to conduct UPI transactions just like those with conventional bank accounts.”

According to Agashe, RBI’s proposal will take UPI payments to the next level and will promote financial inclusion.