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Prepaid Wallet License- An Overview
Since demonetisation, the RBI has shifted its focus to promoting cashless transactions for all financial activities. This led to the introduction of Prepaid Payment Instruments (PPI), commonly known as PPI License or Prepaid Wallet License in India. Prepaid Wallets are digital tools that facilitate money transfers online.
To operate within this system, businesses must obtain a PPI License from the RBI, as regulated under the Payment and Settlement Systems Act, 2007. The main purpose of this license is to allow customers to make purchases or conduct transactions online using stored value in the wallet.
A PPI License enables users to transfer funds and pay for goods and services using the stored value, which can be loaded through cash, bank transfers, or credit cards.
Get expert assistance for obtaining a prepaid payment wallet license in India with the help of our prepaid wallet license consultants.
What is a PPI License?
A PPI License acronym is a prepaid payment instrument, a license that is issued by the Reserve Bank of India (RBI) under the Payment and Settlement Systems Act, 2007. PPI is an instrument that facilitates purchasing goods and services along with financial services, remittances, and fund transfers against the amount or value stored on them.
Some of the examples for PPI are e-wallets, prepaid cards, and various other mobile wallets like Paytm, PhonePe, etc. Therefore, any entrepreneur aiming to run a business of Prepaid Payment Instrument (PPI) must obtain a PPI license from the concerned authority to ensure compliance with financial laws and regulations, safeguard customers' funds, and operate safely within the financial ecosystem.
What are the Types of PPI License?
As per the Reserve Bank of India (RBI), there are three types of PPI licenses:
Closed PPI License
A closed PPI license or a closed Payment Wallet License is a type of PPI license that can be used only to make purchases at the issuing entity, such as a gift voucher or a rail metro card, which can only be used before the respective store or a system. This means it has limited access and is not eligible to buy items or services from various other providers.
Additionally, one cannot withdraw cash from it since the closed-system PPI is not considered a payment system by the RBI. Subsequently, they do not require prior approval from the RBI for issuance.
Semi-closed PPI License
A semi-closed PPI license allows prepaid payment instruments to be used at various establishments, though not universally. This license is granted to banks, NBFCs, and companies registered under the Companies Act 2013 but requires prior authorization from the RBI. These PPI wallets can be used to buy goods and services and are redeemable only at specific merchants who have contracts with the PPI issuer.
Open PPI License
This open PPI license is only issued to banking institutions that have prior approval from the RBI. This payment wallet instrument is used for purchasing, remittances, cash withdrawals, etc. Examples are Master Card, Visa Card, and so on.
Benefits of Prepaid Payment Instrument License
In the Indian economy, obtaining a Prepaid Payment Instrument License or Payment Wallet License is a very beneficial move to run a Prepaid Payment Instrument business:
- PPI license
ensures that businesses comply with the regulatory framework.
- Prepaid
Wallet License has led to wide access to the financial services market,
such as businesses offering e-wallets, prepaid cards, and various other
digital payment solutions.
- Businesses
with Prepaid Payment Instrument Licenses ensure that customers' funds are
safe and secure, increasing their credibility.
- A payment
wallet license also ensures wide revenue opportunities by generating
revenue from transaction fees, value-added services, and partnerships with
merchants.
- Prepaid
Wallet License in India provides seamless fund transfers, offering a quick
and cost-effective transfer system.
- It enhances
flexibility in business operations by tailoring payment solutions.
- With a PPI license, businesses can collaborate with banks and other payment service providers, expanding their network and services.
Documents Required for Prepaid Wallet License
The documents required for a Prepaid Wallet License are as follows:
Applicant's name
Address Proof of Registered Office
No Objection Certificate from RBI
Certification of Incorporation
A Thorough Account of the Company's Main Operations
Managerial Details
Detailed Project Reports and Business Plans
Funding Sources
Proposed Capital Amount
A Financial Year's Audited Balance Sheet
Name and Address of the Company's Bankers
The Appointment of the Company's Statutory Auditor
Profits Anticipated for the Indian Financial System
Any Other Information that RBI Requires
Process for Obtaining a PPI License in India
The steps for getting a PPI license in India are:
Application: Submitting an application to the Reserve Bank of India as per the regulations.
Screening: The RBI starts the screening procedure to verify applicant eligibility.
In-Principle Approval: The RBI grants an "in-principle approval" valid for six months.
Audit Report: Within six months, the applicant provides RBI with an audit report.
Obtaining a License: The RBI issues the Prepaid Wallet License after reviewing all the documents.
Validity Period of Prepaid Payment Wallet License
In general, the validity period of the Prepaid Payment Wallet License granted by RBI is five years but is subject to review and potential revocation.
Recent Updates:
Tiger Global-backed Jupiter received RBI approval for a PPI License.
Neobank Revolut India got RBI approval for a Prepaid Wallet License.
Mufin Group got RBI approval for a Prepaid Payment Wallet License.
Validity Period of Prepaid Payment Wallet License
In general, the validity period of the Prepaid Payment Wallet License granted by RBI is five years but is subject to review and potential revocation.
Recent Updates:Recent Updates:
Tiger Global-backed Jupiter received RBI approval for a PPI License.
Neobank Revolut India got RBI approval for a Prepaid Wallet License.
Mufin Group got RBI approval for a Prepaid Payment Wallet License.
Frequently Asked Questions:
Prepaid Payment Instruments (PPIs) are financial instruments that facilitate transactions for goods and services, including fund transfers, using a stored monetary value. They can be issued in the form of wallets, cards, or vouchers.
Entities such as banks and non-banking financial companies (NBFCs), as well as other businesses meeting RBI guidelines, can apply for a Prepaid Wallet License to operate digital wallets and payment services.
A Prepaid Payment Wallet License is an authorization issued by the Reserve Bank of India (RBI) that allows companies to issue digital wallets, enabling users to store and transact money electronically.
A closed wallet is a type of digital wallet that can only be used for transactions within a specific business or brand. These wallets do not allow withdrawals or payments outside the issuing entity’s platform.
A semi-closed card or wallet allows users to make payments at multiple merchants that have a tie-up with the issuer. However, they do not permit cash withdrawals.
Many leading financial service providers and fintech companies hold PPI licenses, including major banks, payment gateways, and digital wallet companies such as Paytm, PhonePe, Amazon Pay, and Google Pay.
A digital wallet is an electronic payment tool that allows users to store money and make transactions online or via mobile apps, eliminating the need for physical cash.
Yes, both terms are often used interchangeably as the PPI License is required to operate a digital payment wallet in India.
Yes, digital payments are secured through multiple layers of authentication, encryption, and regulatory compliance. RBI mandates KYC verification and fraud prevention measures to enhance security.
Several digital wallets are popular in India, including Paytm, PhonePe, Google Pay, Amazon Pay, and MobiKwik, each offering unique features and benefits.
The Reserve Bank of India (RBI) is the regulatory authority responsible for issuing Payment Wallet Licenses in India, ensuring compliance with financial and cybersecurity regulations.
