The Reserve Bank of India (RBI) has enabled Prepaid Payment Instrument (PPI) holders to make Unified Payments Interface (UPI) transactions through third-party applications. This policy update aims to simplify digital payments and offer increased convenience to wallet users.
Previously, UPI payments could only be made to, or from a PPI using the PPI issuer’s mobile app. With the new guidelines, full-KYC PPI holders can link their wallets to UPI handles provided by third-party apps, significantly broadening their payment options.
As outlined in the RBI’s statement on development and regulatory policies earlier this year, 2024, this change allows PPI users to make seamless UPI payments by linking their wallets with third-party apps. These transactions will be authenticated using the user’s existing PPI credentials, ensuring security and simplicity.
The key provisions of the revised framework include the following:
- Only full-KYC PPIs can be linked to UPI.
- PPI issuers must enable UPI payments on their apps and facilitate wallet discovery on third-party UPI platforms.
- PPI issuers cannot onboard customers of banks or other PPIs as Payment Service Providers (PSPs).
- UPI transactions via third-party apps will use UPI credentials for authentication.
This step by the RBI is expected to boost the adoption of digital wallets, promote innovation and enhance competition in India’s digital payment landscape, further cementing the country’s position as a global leader in FinTech.
