In a significant development aimed at enhancing digital payment accessibility, the Reserve Bank of India (RBI) has permitted holders of full-KYC Prepaid Payment Instruments (PPIs) to conduct Unified Payments Interface (UPI) transactions via third-party applications. This shift, which was announced in April, marks a notable change from the previous regulation that limited PPI holders to only using the mobile apps provided by their respective PPI issuers for UPI payments.
The RBI’s decision is a strategic step toward improving the interoperability of digital payment systems, ensuring that users have a more seamless experience. As per the revised guidelines, PPI issuers are now required to allow full-KYC wallet holders to link their wallets to third-party UPI apps. Transactions made through these apps will be authenticated using the PPI holder’s existing UPI credentials, simplifying the process and providing users with more options.
The change aims to further boost the adoption of digital payments, especially for small-value transactions, which have seen a steady rise in recent years. The then RBI Governor, Shaktikanta Das, emphasized that this initiative would encourage more people to use digital payments, making them more accessible and efficient.
This move also reflects the RBI’s ongoing commitment to fostering innovation within India’s payment ecosystem and supporting the continued growth of digital wallets. By broadening the scope for PPI holders, the RBI seeks to stimulate greater usage of these wallets, potentially driving wider financial inclusion.
In terms of market dynamics, the UPI payment landscape is led by PhonePe, which holds a dominant share of nearly 50%. Google Pay and Paytm follow, with respective market shares of 37% and 7%. Additionally, newer entrants like CRED, Navi, and Flipkart’s Super.money are beginning to see increased transaction volumes, further diversifying the competitive environment.
The RBI’s decision is expected to have a profound impact, not just by enhancing user convenience but also by promoting innovation and increasing transaction volume in India’s rapidly growing digital payment space.
