47
Payments Regulation in Asia
When the UPI was introduced, wallets became less relevant (Figure 17). One of the main drivers of this trend was that wallets did not provide much in the way of interoperability while the UPI did. In addition, the Reserve Bank of India (RBI) also introduced caps on wallet market share to protect consumers and merchants by preventing the emergence of a dominant player.
Figure 17. Number of Transactions Processed on UPI or Digital Wallets (2016-2020) 118
In a May 2021 circular, the RBI announced several changes relevant to bank and non-bank Prepaid Payment Instruments (PPIs) (both cards and wallets). While addressing issues of account limits and cash withdrawals, the circular also introduced guidelines for inter-wallet interoperability. The circular mandated issuers of PPIs to give consumers full interoperability through authorised card networks for PPIs in the form of cards and UPI for PPIs in the form of electronic wallets. This would only be required in instances where full know-your-customer was completed. In the wallet space, this would effectively allow consumers using a wallet like PhonePe to transfer funds directly to a consumer using a different wallet. The interoperability mandate also stretches to the acceptance of these instruments which would effectively mean any wallet would have to support acceptance at any merchant location where any UPI wallet is accepted. By March 2022, interoperability between wallet providers was mandated. In November 2020, the NPCI put forward a circular 119 announcing all TPAPs operating in the UPI ecosystem must limit their market share of overall volume of transactions processed through UPI during the preceding 3 months rolling to 30%. In March 2021, the NPCI produced a standard operating procedure, clarifying that the mechanism which will predominantly be used to regulate breaches of the market share cap will be new customer onboarding with no intention of impacting the transactions of consumers already on-boarded. 120 What is also important to note here is that there are no caps on payee TPAP but only on the payer TPAP. In other words,
118
2020 India Mobile Payments Market Report, S&P Global Market Intelligence
119
NPCI/UPI/OC-97/2020-21
120
NPCI/UPI/SOP-01/2020-21
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