RBI pushes vigorously for Digital Payments amid COVID-19
If you were using mobile wallets till now, you might have been annoyed by the restricted nature of their operation. However, RBI has recently been pushing for the digital payment revolution and has been pushing for digital payments vigorously. The ability to perform NEFT and RTGS transactions through mobile wallets is a welcome gesture in the right direction.
The prime financial decision-maker in India with respect to banking transactions, the Reserve Bank of India has focussed primarily on digital payments and digital banking for improving the banking transactions and their ease during pandemic times. If the recent monetary policy review and the decisions thereof can be considered to be an indicator, the push appears to be towards digital payments. The focus has been on making your digital wallets more efficient and useful.
The Push on improving the usability and efficiency on Digital Wallets
The monetary policy review by the Reserve bank of India focused primarily on three factors when it comes to mobile wallets. The aim is clearly in the direction of making mobile wallets more self sufficient and efficient.
image credit - www.merchantmaverick.com
To begin with, the mobile wallets were permitted to provide the Real-Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) facilities to their customers. The territory which was hitherto limited to banking channels and UPI service providers, availability of NEFT and RTGS through the mobile wallets can definitely be seen as an attempt to give more power to the wallets.
The second focus has been the interoperability of mobile wallets. This can be a great option as you can transfer and make use of the funds in your digital wallets between them.
The third change brought is the increase of the maximum funds you can hold in the digital wallets. You will now be able to hold a maximum balance of up to Rs. 2 Lakhs in your wallet, as opposed to the Rs. 1 lakh limit, allowed previously.
All these measures are being seen as an attempt to push the public towards using digital wallets and other options of digital money. The crux of the matter is that your mobile wallets will now become equivalent to your bank accounts.
How will this affect the Users of Digital Wallets?
The new policy is designed to convert digital wallets into banking accounts in a way. The prime concern that the users of the digital wallets faced was that they could not use the funds in the wallets as if they would use it if the same funds were in a bank account. Now, the thin line between mobile wallets and bank account has been done away with.
Mobile wallets have traditionally used for making payments. But, so far the use was limited only for the products and services that are offered by the wallet themselves. when it comes to the options for paying other utilities or requirements that remained out of what these digital wallets offered - they were simply impractical and useless. Transferring the money in your wallet directly to someone was impossible as of now. The only way you could use the funds in your wallet was to use it for the services offered by the wallet itself.
With the new policy in place, you can simply add a beneficiary to your mobile wallet and begin transferring money. You will now be able to make business payments to any of your accounts and merchants rather easily even when the mobile wallet itself does not offer the service.
The importance of interoperability is yet another factor one needs to pay attention to. RBI has made it mandatory for the full KYC mobile wallets to make their wallets interoperable. This simplifies another issue faced by digital wallets. Hitherto, there was no option for transferring the money from the wallet of one brand to another. It may be remembered that the interoperability was made a voluntary decision in 2018. However, the changeover to full KYC has not yet been completed.
Will this move affect UPI transactions?
It may be noted that the mobile wallets have been using the UPI transactions for transferring the funds to wallets and bank accounts. In fact, as compared to the NEFT and RTGS, the UPI transactions have been rated to be the fastest and easier options for money transfer. In this context, will the new move affect UPI transactions in any way?
It may be noticed that the NEFT transactions take a minimum of 15 to 20 minutes for the funds to get transferred from an account to another. The RTGS transactions, on the other hand, are real-time, but it does come with a minimum transaction amount of Rs. 2 lakhs. In contrast, UPI transactions can be made for even Re. 1 and the funds are transferred in an instant.
We do not foresee any difference in the UPI transaction due to this move. The major purpose of enabling the NEFT and RTGS transaction on mobile wallets is to ease the burden on the banking systems. This can also be seen as a great option for bringing the rural population more towards banking services.
The Final Words
That is indeed a welcome move. The industry experts and even the general public have appreciated the move. If implemented in the right spirit, it can definitely bring a huge improvement in the banking sector in general and the digital wallets sector in particular.