RBI to regulate framework for money transfers between mobile wallets

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In a move to push for digital payments, the Reserve Bank of India (RBI) is setting framework to allow direct money transfers between different mobile wallets. Post demonetization in November 2016, citizens of India shifted their transactions from cash to digital and mobile apps. Paytm was a popular choice among the people and the firm had processed over 7 million transactions per day during early demonetization days.

Individuals are allowed to transfer up to INR20,000 per month while merchants can transfer up to INR50,000 per month from their mobile wallets to banks. Another wallet Chillr offers money transfer between bank accounts but currently supports only few banks. Most of the leading banks also allow direct money transfers via their own mobile wallets. The Government of India has launched BHIM, a UPI-based mobile wallet, which can be used to make payments between banks and non-banks.

However, currently wallet firms are not permitted to enable users to access Unified Payments Interface (UPI), which will allow users to transfer money from one bank account to another. In a report submitted in December 2016, by an 11-member committee headed by former finance minister Ratan Watal, it was recommended that the access to payment system should be kept open so as to allow non-bank payment service firms. In order to offer open payments infrastructure, RBI is seeking to amend the UPI interface so as to allow mobile wallet firms to expand their offerings.

These measures to encourage digital payments and the promotion of non-bank mobile wallets can adversely affect the payments in traditional banks. Since the underlying money will be involved with a bank account, the increase in money transfers between wallets is expected not to bother banks much.

P2P transfer market transaction value was US$ 7,681 million in 2016 and expected to reach US$ 5,31,896 million in 2021. From 2015 to 2016, the growth rate achieved was 152.6% while expected CAGR from 2017 to 2021 is projected to be 120.6%.

To know more and gain deeper understanding of mobile payment industry in India, click here.