The Reserve Bank of India (RBI) introduced the UPI new guidelines, following which they proposed allowing prepaid payment devices to make payments using third-party UPI applications. What do the UPI transaction new rules mean for thousands of UPI customers?
If you use Paytm, PhonePe, or Amazon Pay, you likely use a prepaid payment instrument (PPI). Customers have often complained that they cannot use money deposited in these wallets to make payments on other companies' platforms or scanners, hence the RBI proposed the UPI transaction new rules.
Read below this article to explore more about the new rules for UPI payment, ranging from RBI guidelines for UPI transaction charges to RBI guidelines for UPI fraud in banks.
Overview
The table below summarises some key points about the new rules for UPI payment that one should know.
| What are the UPI's new rules? | Allowed Prepaid Payment Instruments (PPI) to be linked with third-party apps like UPI apps. |
|---|
| Introduced by | Reserve Bank of India |
| Impact of RBI guidelines for UPI fraud in banks | Convenience, strengthened security, and proper redressal systems |
| Transaction limit | Rs 10,000 per month |
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RBI’s Proposal For UPI New Rules
To address this, the RBI has proposed allowing PPIs to be linked to third-party UPI applications. But what do the UPI's new rules mean for customers?
This means that payments are possible on any app. The proposal of the UPI payment new rules allows granting permission to link PPIs through third-party UPI apps to provide more flexibility to PPI holders. This would enable PPI users to make UPI payments like a bank account.
With new UPI rules in effect, customers can use their wallet with any UPI app, even if the wallet and UPI app are from different companies. The RBI says that until now, as per UPI rules, wallets could only be used to make UPI payments using the application provided by the same PPI issuer.
For example, if, as per UPI rules, you use a PhonePe wallet, you have to use PhonePe to make payments from that wallet. You cannot use your wallet money to make payments using another third-party UPI application.
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Understanding Prepaid Payment Instruments
Under the UPI payment new rules, prepaid payment instruments allow users to store money in digital or physical formats to make hassle-free payments without needing bank accounts or credit cards.
Some common examples include:
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Mobile Wallets: Paytm, PhonePe, Google Pay, etc.
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Prepaid Cards: Gift cards and meal cards for employees
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Paper Vouchers: Used extensively in government schemes
As per RBI data, the total outstanding PPI transactions touched ₹6.27 lakh crore at the end of May 2022 through 57 crore digital wallets operational in the country.
But most mobile wallet players have developed proprietary payment acceptance networks outside of UPI channels, which prevent money transfers between different apps, limiting use cases for consumers.
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Why The RBI Wants UPI-PPI Integration?
By allowing PPI apps to plug into the UPI highway, the RBI aims to drive the following key outcomes through the new UPI rules:
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Interoperability: Users can pay via UPI across merchant apps and platforms through PPIs.
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Innovation: Fintech firms can build value-added services by combining the strengths of PPIs and UPIs.
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Financial Inclusion: Migrant workers and urban poor relying on PPIs get access to a UPI payment network spanning 200+ banks.
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Consumer Convenience: As per the UPI transaction new rules, switch easily between prepaid wallets, UPI apps, and bank accounts for specific use cases.
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Standardisation: Aligned customer experience for PPI and UPI payments, driving adoption.
The RBI emphasised that PPI interoperability with UPI would be allowed only for small-value transactions up to ₹10,000 per month for an individual user.
This safeguards existing PPI business models while harnessing the network effects of UPI.
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Potential Impact On Digital Payments Growth In India
With over 300 million smartphone users still dependent on cash for daily transactions, UPI charges new rules that spur digital payment innovation through interoperability will accelerate India’s transition towards a “cashless” economy.
As per UPI's new guidelines, easy pay features combined with attractive loyalty programmes can drive rapid merchant acquisition across underpenetrated user segments from small towns and cities.
As more startups leverage UPI connectivity, enhanced competition is also expected to make transaction charges more affordable, thereby boosting adoption at local vendors.
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Conclusion
Industry experts have welcomed the RBI's progressive consultative document to open doors for a complementary union between the PPI and UPI ecosystems. Through the UPI's new guidelines, users can now make payments through third-party applications while using the wallet balance from multiple payment gateways, which expands the wallet functionality as well as improves the scope and range of online transactions.
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