Pre-Paid Payment Instruments in India Prepaid payment instruments are payment instruments that facilitate purchase of goods and services against the value stored in such instruments. Prepaid instruments can be issued as smart card, magnetic strip cards, internet accounts, mobile wallets, paper vouchers etc. April 27, 2009: RBI (Reserve Bank of India) I ndia) issued guide lines on Issuance and Operation Operation of Pre-paid Payment Instruments in India. Under these Guidelines RBI has define the prepaid instruments i nstruments into the following classifications1. Closed system: Payment instruments issued by a person or an organization for facilitating the purchase of goods and services from their respective establishment only. These do not include third party services and cash withdrawal. E.g. shopper stop card, Gift vouchers 2. Semi closed: Issued by the Bank. Redeemable at a group of clearly identified merchants locations/establishments. These do not permit cash withdrawal or redemption. 3. Open System: Issued by Bank only. Can be used at any card accepting merchants locations and it also permit cash withdrawal at ATMs. August 18, 2009: Amendment to the guide lines Under this amendment, RBI has decided to permit mobile operators to issue i ssue mobile phone based semiclosed system pre-paid payment instruments. This was limited to Banks only in the earlier guide g uide lines.
Synopsis Pre-Paid Payment
Categories
Semi Closed
Closed
Open
Category A
Category B
Category C
Limit
5k
1k
5k
10k
50k
Banks Participation required
No
No
No
No
Yes
None InHouse Any retail
None
Limited
Full
Pre-defined
Pre-defined
Limited Utility Companies
Any retail
Any retail
Any retail
Branch/BC
No
No
No
Yes, via a Bank
KYC Merchants Cash In Cash Out
No
All
Current Amendment allowing Mobile operators to explore this option
Currently mobile operators are maintain a single wallet i.e. Prepaid Balance which can be redeemed for telecom services. With the current amendment, Carriers can maintain two wallets. In order to leverage this opportunity, the carrier needs to create an Eco-system of merchants that accept the new Carrier Wallet. We can leverage our existing retail network to top-up this Wallet in addition to the existing practice of topping up our prepaid balances.
Opportunities
Opportunity to participate in a retail payment system. Position services as the Debit card for the unbanked segments. Leverage the existing Carrier retail network for creating an alternate stored wallet for
y
y y
customers consumption of non-core telecom products & services.
Opportunity to sell VAS (Value Added Services) services to customers of competition networks.
y
Threats
Currently Carriers are working on a capability to launch as per these guidelines; however they
y
have not yet invested in an ecosystem.
Billing relationships with customers can be formed by Nokia, Google, iPhone etc. This will give rise to a new set of aggregators with interoperability & large application stores.
y
y
Regulatory Asks
Telecom License fee needs to be charged for this wallet on bottom line & not top line. Especially
y
when this is redeemed for purchasing non-core telecom products. Margins do not justify a deduction of approximately 14%.
Reload of this wallet using operator talk time.
y
Clarity Required
The daily transaction limits have not been specified in the guidelines. t o understand Since products and services could be bought with this balance, one would need to
y
y
how to adjust and account for Service / Sales tax in the system.