Digital PaymentsVAIBHAV JOSHI

Digital Wallets & Prepaid Payment Ecosystem

Types of Prepaid Payment Instruments

Closed Loop Semi-Closed Loop Open Loop

Digital Wallets• Digital Wallet is a Prepaid Payment Instrument governed by

Reserve Bank of India’s (RBI) under the “Issuance and Operations of Prepaid Payment Issuer guideline”

• As per RBI any Prepaid Instrument can only be issued by the following entities:

1) Banks 2) Prepaid Payment Instrument Issuers (PPIs)• Any entity willing to come up with their own digital wallet

needs to be either a PPI or should tie-up with a Bank to use their license for the wallet issuance

What is a Digital Wallet?• Digital Wallet or Wallet is a Prepaid Payment Instrument• There are separate platform/System of Records for Prepaid Instruments

similar to the Core Banking systems that are for CA SA• It is accessed via a mobile app or a portal app• Wallet can be used to make digital payments only• The limits for semi close Prepaid Instrument without KYC is 10k per

month, with KYC is 100k at any point of time• The limits for Open loop Prepaid Instrument is 50k at any point of time,

Open loop can only be done post KYC (Bank Issued Card Plastic only)

Prepaid Instrument Load Methods

• Load via Payment Gateway• Load via NEFT• Load via IMPS• Load via Cash

Bank Issued vs PPI IssuedBank Issued Prepaid Instrument PPI Issued Prepaid InstrumentCan be semi close (eComm only) and open loop (eComm, POS, ATMs)

Can only be semi close (eComm only)

Can work across MasterCard/VISA/Rupay network

Can only work across the merchants with whom the PPI has done a specific contract and tie-up

Can work across all POS terminals and eComm

If a plastic is issued, it will only work on the POS terminal which has been deployed by the PPI – more of a closed loop type of transaction

Ability to withdraw cash at ATMs Can not be used at ATMsCan be loaded through PG, Cash Can be loaded through PG if PPI has contracted PG

services for load, Cash only if PPI has own set of Retail network

Co brand with Bank has better visibility and brand recognition

Co brand subject to RBI approval

Auto load through NACH, wallet to wallet, wallet to Account etc..

Features differ from PPI to PPI, primarily used for closed user group

Balance in Pool A/c maintained by Bank Balance in Escrow A/c, but maintained at Bank

Sample Transaction FlowUse of wallet at eComm portal

Merchant site requests

authorization from acquiring host

Acquiring host requests

authorization from Card host

Card host checks balance and

authorize transaction

Card host authorizes transaction

Settlement processed by

issuing Bank based on the report

received from Card host

Important Note: For MasterCard/VISA/Rupay branded wallets, the acquiring switch will speak with the network who will in turn seek authorization from the acquiring host

Benefits• Instant payment and realization, no dependency on external networks• On Us transactions, saving on transaction charges on own portal• Secured transaction, limited exposure• Integrated wallet, designed to simplify online payment check out process• No need to manually input payment info every time• Loyalty & Rewards calculation become easier with payment track record• Faster check out process, leading to higher conversion rate and more revenue• Universal acceptance• Multiple acceptance modes – Web, Mobile, POS etc..• Customer engagement, build more stickiness

Use Cases – Cashless Campus Tap & Go Payments via NFC Student ID plus Payments Card

RFID for Access Magstrip for Payments

Semi-Closed Loop Open Loop Accessible via Mobile App

Merchant POS NFC / Magstripe acquiring QR Code based Mobile App based payments Card Not Present Mobile to Mobile Payments Card Not Present Sound Wave frequency based Payments Card Not Present URL based Payments

Use Cases – Card for NRIs / Foreign Tourists

Get Prepaid Card at Airport Money Exchange Counter Provide Passport as KYC Limit of INR 200,000 Cash withdrawal limit of INR 50,000

Use Cases – Money Transfer Service Scheme (MTSS)

For all Foreign Inward Remittances Beneficiary can walk into a BC Agent outlet that is also licensed

for MTSS Instead of taking Cash, take the proceedings on a Card Limit of INR 50,000 Subject to KYC

Use Cases – Gift Card

Semi-Closed Prepaid Instrument One time load Limit of INR 50,000 No Cash Withdrawal allowed

Emerging Payment Methods & Technology

NACH IMPS UPI AEPS ABPS QR Code based Mobile payments

NACH Simplified NACH is the product of NPCI to provide a better & efficient Mandate

based debit services to the banks Automated processing and exchange of mandate information

electronically with well-defined timelines for acknowledgement/confirmation

How it works? Bank A/c holder fill NACH mandate and gives to Corporate Corporate processes NACH as per mandate for automated payments Payments can at a specified regular internals; OR Payments can be initiated upon certain instances

NACH

Aadhaar Payment Bridge (APB) System

Used by Govt Departments for Direct Benefit Transfer (DBT) to Citizens such as: LPG Subsidy MNREGA Old Age Pensions Student Scholarships 30+ other welfare schemes

Aadhaar Seeding Process

APB Process Flow

Aadhaar Enabled Payment System (AEPS)

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