Prepaid Wallet
What is Prepaid Wallet?
Pollution Authorisation
Pre-paid payment instruments are payment instruments that facilitate
- Purchase of goods and services,
- Including funds transfer, against the value stored on such instruments.
The value stored on such instruments represents the value paid for by the holders by
- Cash,
- By debit to a bank account,
- By credit card.
The pre-paid instruments can be issued as
- Smart cards,
- Magnetic stripe cards,
- Internet accounts,
- Internet wallets,
- Mobile accounts,
- Mobile wallets
- Paper vouchers
Any such instrument which can be used to access the pre-paid amount (collectively called Prepaid Payment Instruments hereafter).
Classification of Prepaid Payment Instruments
- S.No
- 1.
- 2.
- 3.
- Type of prepaid
- Closed System Payment Instruments
- Semi-Closed System Payment Instruments
- Open System Payment Instruments
- Payment instruments
- These are payment instruments issued by a person for facilitating the purchase of goods and services from him/it. These instruments do not permit cash withdrawal or redemption. As these instruments do not facilitate payments and settlement for third party services, issue and operation of such instruments are not classified as payment systems.
- These are payment instruments which can be used for purchase of goods and services, including financial services at a group of clearly identified merchant locations/ establishments which have a specific contract with the issuer to accept the payment instruments. These instruments do not permit cash withdrawal or redemption by the holder.
- These are payment instruments which can be used for purchase of goods and services, including financial services like funds transfer at any card accepting merchant locations (point of sale terminals) and also permit cash withdrawal at ATMs / BCs.
- Description Example
- Ola Wallet
- Paytm
- BHIM/Paytm
Prepaid Wallet
Prepaid Wallet
Important Eligibility Criteria(As per RBI)
- Applicant must be a Company incorporated in India and registered under the Companies Act, 1956 or the Companies Act, 2013
- Minimum positive net-worth of Rs. 5 crore as per the latest audited balance sheet at the time of submitting the application, which shall, by the end of the third financial year from the date of receiving final authorisation, be increased to a minimum positive net-worth of Rs. 15 crore and be maintained at all times.
- Directors must be “fit and Proper” for appointment and CIBIL of all the Directors should be more than 700. Else a good justification for the Lower Score.
- The Memorandum of Association (MOA) of the applicant non-bank entity shall cover the proposed activity of operating as a PPI issuer.
Steps to Incorporate Company which involved in issuance of Prepaid Payment Instruments(PPI):
- Form a company with Minimum Net Worth of INR 5 crore which by the end of the third financial year from the date of receiving final authorisation, shall be increased to a minimum positive net-worth of Rs. 15 crore and be maintained at all times.
- Apply to RBI for authorization with the required documents.
- The applications shall be initially screened by RBI to ensure prima facie eligibility of the applicants.
- Subject to meeting the eligibility criteria and other conditions, the RBI
shall issue an ‘in-principle’ approval, which shall be valid for a period of six months. - The entity shall submit a satisfactory System Audit Report (SAR) and net-
worth certificate to RBI within the given six months. - On receipt of satisfactory SAR and net-worth certificate, the RBI shall
grant final Certificate of Authorisation.
Documents/information required for Certificate of Authorisation
- Copy of Memorandum of Articles Association together with a letter indicating main business
- Previous experience of applicant and associated companies/firms/entities in the payment systems area:
- Particulars of Payment System sought to be set up (full details to be furnished) including process flow, technology to be used, security features, inter-operability
- Type of payment system proposed to be set up i.e. whether electronic fund transfer or payment card based/ internet based/ mobile phone based
- Whether the payment system will cover a particular region or the whole country:
- Does the proposed payment system seek to address the needs of any particular social/ economic segment/s of the population :
- Method of settlement of payment claims, namely .whether gross, net or a hybrid method combining both gross and net methods:
- Name of the settlement agent for the payment system sought to be set up:
- Whether the applicant or settlement agent will act as a central counterparty to provide guaranteed/ secured settlement
- On which day will be the account credited / funds made available to the beneficiary:
- What will be the risks in operating the payment system sought to be set up and how does the applicant propose to mitigate them :
- Mention the customer grievances redressal machinery proposed for the payment system sought to be set up :
- The time proposed to be taken to dispose customer complaints :
- Amount of finance required for executing payment system project :
- Sources of finances for executing the payment system project : (a) Amount of own capital proposed to be deployed : (b) Amount of borrowings expected from banks; (c) Amount of borrowing expected from sources other than banks:
- Rate of return on investment expected from the payment system sought to be set up :
- How does the applicant propose to recover its investment and earn an income, that is , whether through cash flows or by levying joining fees, security fees, annual/ operating charges etc.
Prepaid Wallet
Frequently asked Question
Question:- How prepaid wallet is different from digital wallet ?
Ans. Digital wallets and prepaid wallets serve different purposes. In case of a digital wallet, your money continues to remain in your bank account or credit card. In a prepaid wallet, the money moves from your account to either a merchant’s current account or an escrow account depending on the type of wallet.
Question:- What is Prepaid Payment Instruments (PPIs?
Ans: PPIs are payment instruments that facilitate purchase of goods and services, including financial services, remittance facilities, etc., against the value stored on such instruments.
Question :- what are the conditions to issue pre-paid payment instruments by banks, NBFCs and other entity ?
Ans:
- The maximum validity of the pre-paid gift instruments shall be three years
- Maximum value of each such payment instrument shall not exceed Rs. 50,000/-
- These instruments shall not be reloadable
- Cash withdrawal shall not be permitted for such instruments
- Full KYC of the purchasers of such instruments shall be maintained
- The issuer shall maintain the details of the persons to whom such instruments have been issued and make available the same on demand