The launch of legitimate e-wallets or stored value cards has finally crossed the last hurdle with the Reserve Bank of India (RBI) releasing the regulatory framework for their operations under the Payments Act. E-wallets are an ideal product for careful Indian consumers who want the advantage of electronic transactions to make smaller value purchases, such as flowers, books, air tickets or even movie tickets, but do not want to expose their entire bank account to electronic security fraud which is rampant and growing. As for credit cards, their usage had dropped globally because of usurious interest rates and the sheer harassment suffered when credit card companies fail to send their bills on time.
E-wallets or ‘virtual money’ (that can be charged online from your bank account) is a piece of plastic on which you can load as much value as you choose and also top it up or recharge it, once you have spent the value on the card. The main advantage? They are a low-risk electronic payment option that limits one’s loss to the monetary value loaded on the card.
The RBI has cleared the regula-tions under the broad definition of ‘pre-paid’ instruments and caps the maximum value at Rs50,000 with a minimum validity of six months from the date of activation or issuance to the holder. Interestingly, the RBI has imposed some conditions for consumer protection at the very outset. The issuer cannot forfeit the outstanding balance and must permit balance transfers in case of non-reloadable pre-paid instruments after their expiry. It has also stipulated that the issuer “shall not dishonour customer instructions for payments/transfers of money, at approved locations, if there is sufficient outstanding balance.” While eligible banks will be permitted to issue mobile-based pre-paid instruments as well as all categories of e-wallets, finance companies and others can only provide semi-closed instruments. Issuers will require a capital of Rs100 lakh and specific sanction from the RBI. Consumers who have a problem with issuers can take their complaints to the Banking Ombudsman.
Dozens of companies and banks have been waiting for the RBI to frame regulations on e-wallets. We believe that well-regulated pre-paid cards, especially those issued by well-known entities and banks, will give a big fillip to small businesses or low-unit-cost products by enabling cost-effective e-transactions.