To ease money transfers and make it tech-savvy the Reserve Bank of India (“RBI”) has taken many steps to make payments fast, hence the onset of payment wallet license or prepaid wallet license. The different forms of payment wallet license are:
These payment services are operated under financial regulation and performed via mobile or cards or the internet. The regularity and issuing authority for issuing the Payment wallet license or a prepaid payment license is RBI. RBI is also responsible for issuing guidelines and rules for prepaid payment wallets. Payment wallet instruments are instruments that facilitate the purchase of goods and services against the stored value on such instruments. The prepaid instruments can be issued as magnetic stripe cards, smart cards, internet accounts, mobile accounts, mobile wallets and paper vouchers.
The payment wallets in India are classified as follows as per RBI: Closed System Payment: The closed system wallet is a wallet that is offered by the company to its customers which can be used only for purchasing on the online platform that the company operates on. Example: Myntra, Cleartrip, etc. Advantages:
Semi-closed Payment: This wallet is used to buy goods and services, and it acts as a payment instrument that is redeemable by an identified merchant that contracts specifically with the issuer to accept the payment instrument. Example: Paytm, Mobikwik, Freecharge, etc. Advantages:
Open System Payment: This covers all the limitations of the Closed and semi-closed system. This can be used for the purchase of goods and services and also permit cash withdrawal at an ATM. Example: Visa Card, Master Card, Rupay Card, etc. Advantages:
Step 1 – Formation of the company under the Companies Act, 2013 by applying to the Registrar of Companies.
Step 2 – File application for approval in Form A as per Regulation 3(2) of the Payment and Settlement Systems Regulations, 2008 along with the requisite fees to the Reserve Bank of India for grant of license.
Step 3 – The basic screening process will take place by the RBI to ensure the prima facie eligibility of the applicant.
Step 4 – Subject to the fulfilment of the eligibility criteria and other conditions the Reserve Bank of India issues an ‘in-principle’ approval. The validity of this approval will be 6 months from the date of granting of the approval.
Step 5 – The company must submit a satisfactory system audit report to RBI within six months failing which the ‘in-principle’ approval granted by the RBI will lapse, and the company can appeal for an extension of six months in advance in writing, specifying the valid reasons.
Step 6 – Post consideration of all particulars furnished, the entities are granted final approval. The company shall commence business within six months from the grant of Certificate of Authorization.
There are many benefits of prepaid wallets, and they have become the new age money transfer mechanism. These wallets can never be stolen or lost; it is a fast track method for transfer, and the maximum time for a transfer is 24 hours. They can be easily loaded and come with a lot of incentives on the increased spend on them. Also, there are no extra charges for the activation of such wallets.
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