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The Reserve Bank of India (RBI) recently issued guidelines to allow interoperability for mobile wallets that are know-your-customer (KYC) compliant.
The move will enable the transfer of funds seamlessly between various mobile wallets such as Paytm and PhonePe, boosting companies and creating a level-playing field between mobile wallets that operate without payment bank licences and payments banks.
RBI - Move - Wallet-to-wallet - Transfers
Here's how the RBI's move will affect wallet-to-wallet transfers:
The industry is witnessing a change in customer preference, where cards are not the form factor of choice for electronic payments and are being replaced by the mobile phone or biometric payments.
Banks - Success - Wallets - Unified - Payment
While the traditional banks have seen moderate success with their own mobile wallets, and the Unified Payment Interface (UPI) is seen as a turbo boost, allowing interoperable payments using a simple unique identifier known as virtual address.
According to RBI data, wallet transaction volumes rose to 340.65 million (in volume) in August from 225.43 million in August last year. The data shows that wallet transactions continued to rise even after RBI introduced KYC norms.
KYC - Process - Banks - Institutions - Information
KYC is a process through which banks and other financial institutions obtain and verify information about a customers’ identity and address to ensure services are not misused.
While operational guidelines on interoperability will be issued separately, it is clear from RBI's direction that the onus lies on KYC compliance.
Bank - KYC - Guidelines - Entities - Banks
This means that the central bank may have to update its KYC guidelines for entities such as banks and prepaid payment instruments (PPIs)...
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