Prepaid Payment Instrument (PPI)
Context:
The total number of Prepaid Payment Instrument (PPI) wallets in India witnessed a notable decline in 2024, as per data from the Reserve Bank of India (RBI).
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- By November, PPI wallets had fallen to 1.14 billion, marking a 20.4% year-to-date (YTD) decline from 1.44 billion in January.
- On a year-on-year (YoY) basis, the drop was 16.7%, with 1.37 billion wallets recorded in November 2023.
Decline Among Banking Players
- The reduction in PPI wallets was most pronounced among banking players, particularly Paytm Payments Bank and Airtel Payments Bank, which recorded significant declines between January and November 2024.
- Paytm Payments Bank saw its PPI wallet count drop by 42% YoY in November.
- Airtel Payments Bank experienced a 48.5% YoY decline during the same period.
- The decline was attributed to regulatory actions, such as the one taken by the RBI against Paytm Payments Bank in January, and the deactivation of dormant accounts, according to industry experts.
Prepaid Payment Instruments (PPIs)
These are financial tools that allow users to store money electronically for the purpose of making purchases, transferring funds, and conducting various financial transactions. They are regulated by the Reserve Bank of India (RBI) under the Payment and Settlement Systems Act, 2007.
About:
- Issuer: PPIs can be issued by both banks and non-banking companies. Banks need approval from the Reserve Bank of India (RBI) to issue PPIs. Non-bank issuers are companies registered in India under the Companies Act of 1956 or 2013. They can issue PPIs to individuals or organisations after getting authorisation from the RBI.
- PPIs are loaded through cash (up to a limit of INR 50,000/-) or any other electronic means.
Types of Prepaid Payment Instruments:
- Closed System PPIs: Issued by a specific entity for purchasing goods and services exclusively from that entity. Examples include gift cards and store vouchers. It cannot be used for cash withdrawals or peer-to-peer transfers.
- Semi-Closed System PPIs: Allow users to make purchases at multiple merchants but do not permit cash withdrawals. Examples include mobile wallets like Paytm or Amazon Pay.
- Full-KYC PPIs: Issued after completing Know Your Customer (KYC) verification. Can be used for a wider range of transactions, including cash withdrawals, with higher limits.
The contrasting trends between PPI wallets and PPI cards highlight the shifting dynamics in India’s digital payments landscape, influenced by regulatory actions, account management practices, and the growing prominence of fintech players.
