The whole world is well along its journey toward a cashless economy. With multiple innovations in the market during the past few years, this journey has accelerated. Among all the contributing factors around its success, prepayment solutions have played a fundamental role in advancing our economy along this path.
Today, India has crossed 25 million transactions in real-time using PPIs (Prepaid payment instruments) and holds the top spot for most transactions. As a result, PPIs have grown into a critical factor to drive the growth of the FinTech and banking industries.
Benefits of PPIs For Businesses Today:
Prepayment solutions can come in several forms such as prepaid cards, multipurpose cards, multi-currency cards and digital wallets. Each of these can help boost customer loyalty, increase sales and drive profitability. Every transaction made using wallet-enabled payment cards helps a vendor earn revenue too.
Today, organisations across the world need to leverage PPIs so that they can tap into the growing smartphone user base that stands at 760 million today.
Types of Prepaid Payment Instruments:
A PPI can be of several types such as virtual cards, digital wallets and e-wallets that allow consumers to buy products, use services, transfer funds and remit money using a registered prepaid account. End consumers are allowed to load and reload money to their wallet account from their official bank accounts, UPI IDs or payment cards. The limit to which customers can load their cards is INR 50,000 each month, varying based on the overall PPI limit. According to the 2021 monetary policy by the RBI, this amount has been increased to INR 2,00,000 for all PPIs where the KYC is complete.
PPIs can be divided into three broad categories:
– Closed System PPIs:
This category of PPIs includes gift cards, gift vouchers, smart cards, loyalty program cards etc. These prepaid payment instruments are generally used only within the domain of the issuing business, for example, Amazon gift cards or Shoppers Stop points. A customer cannot use this money or these benefits for products or services from other parties, nor can they exchange it for cash.
– Semi-closed System PPIs:
This includes various platforms and commonly-used brands like PhonePe, PayTM, YONO, GPay and PayZapp (the HDFC bank PPI). A semi-closed PPI is usually issued by a bank or NBFC (non-banking financial institution) after receiving due approval from the Reserve Bank of India. PPI-MTS (PPIs for Mass Transit Systems), gift PPIs and meal vouchers or coupons are also semi-closed PPIs except for the fund transfer or cash withdrawal facilities. However, the RBI has made a provision for interoperability for PPIs. Based on the KYC (Know Your Customer) norms laid down by the governing bodies, a semi-closed PPI can be said to belong to one of three categories:
Minimum Detail PPI
Loading Only From Bank PPI
Full KYC PPI
– Open System PPIs:
This includes cards that banks issue and are approved by the RBI. By using these instruments of payment, customers can buy products and services, remit funds, and transfer money, as well as withdraw cash from POSs, ATMs, and small business payment options.
Which is the Best PPI?
Every PPI serves a different purpose, so whichever one you choose will depend on what you are trying to achieve.