What is Prepaid Payment Instruments (PPIs)? Types & List of PPIs Issuer

What are PPIs?

Prepaid Payment Instruments (PPIs) are payment instruments used to purchase goods and services, including transfer funds, conduct financial transactions, and enable remittances, leveraging the stored value within or on the instrument.

Related Read: What is Advance Payment and How Does It Work With Examples?

Types of Prepaid Payment Instruments

1. Closed PPIs System

According to the RBI, Closed-system PPIs are issued by an entity for purchasing goods and services exclusively from that entity. These instruments are not classified as payment systems by the RBI, and their issuance does not require the RBI’s prior approval.

Closed PPIs System Restrictions

• Cash withdrawals are not permitted.
• These instruments cannot be used for payment or settlement for third party services.

Closed PPIs System Examples

An examples of closed-system PPIs include gift cards issued by specific retailers, metro rail cards, coupons, paper vouchers, etc. Another example is the concept of “pay later” options offered by various e-commerce platforms, where users can purchase specific products or services on credit.

2. Semi Closed PPIs System

Semi-closed system PPIs can be used for online transactions at multiple merchants or partners. These PPIs can only be issued by banking institutions approved by the RBI or non-banking institutions authorized by the RBI. The issuance of such PPIs requires prior approval or authorization from the RBI.

Examples of Semi Closed PPIs System

An examples of semi-closed system PPIs in India include mobile wallets like Paytm, PhonePe and MobiKwik, and payment gateways such as Razorpay and Instamojo. These PPIs enable seamless transactions across a wide range of merchants, making them a preferred choice for consumers. People must know any associated payment gateway charges that may apply during these transactions.

3. Open System PPIs

Open System PPIs can only be issued by banking institutions that have been approved by the RBI. These instruments are used to buy goods and services , remittances, cash withdrawals.

These instruments are accepted both online and offline, making them convenient for various purposes. Users can even make purchases internationally.

Open system PPIs offer global accessibility owing to their integration with the Unified Payments Interface (UPI). This allows linking prepaid wallets on UPI and using them for payments through any UPI-enabled platform.

Whether shopping online or paying at a physical store, open-system PPIs offer a secure and convenient way to complete transactions. They eliminate the need for carrying cash and provide a seamless payment experience.

Examples of Open System PPIs

An examples of PPIs issued under this system are debit cards and credit cards. These are widely accepted across the globe, allowing users to make transactions seamlessly when travelling abroad or purchasing from international merchants.

What are the Types Of Semi-Closed PPIs?

Semi-closed PPIs are a specific category in the digital payment ecosystem. They have restricted usability and are not accepted everywhere.

1. Small PPIs or Minimum Detail PPIs

Minimum detail PIPs will be issued by bank and non-bank PPI issuers after obtaining minimum customer details such as an OTP-verified mobile number, a self-declaration of the customer’s name, and a unique identity number based on a mandatory or officially valid document as specified in the RBI’s KYC Direction, 2016.

These PPIs can be used for purchase of goods and services, funds transfer or cash withdrawal from this PPIs is not permitted.

Types of Small PPIs

There are two types of small PPIs

• PPIs up to ₹10,000 with cash loading: These PPIs must be converted to full KYC PPIs within 24 months.
• PPIs up to ₹10,000 with no cash loading

2. Loading only from a bank account:

Under this PPI, money can only be loaded via the bank account and not through cash or other methods. The maximum loadable amount is Rs. 10,000.

3. Full-KYC PPIs

The PPIs are issued by banks and non-banks after completing Know Your Customer (KYC) verification of the PPI holder. These PPIs can be used for purchasing goods and services, transferring funds, or withdrawing cash.

Who Can Issue PPIs? (Prepaid Payment Instruments)

Entities authorised to issue prepaid payment instruments in India include banks, non-banking financial companies (NBFCs), payment system operators and entities approved by the Reserve Bank of India (RBI). 

List of RBI Approved Bank PPI Issuer

As per RBI from February 15, 2024, here’s a list of banks authorized to issue Prepaid Payment Instruments in India.

List of RBI Approved Non Bank PPI Issuer

As per RBI, here’s a list of non-bank entities authorized to issue Prepaid Payment Instruments in India.

Customer Protection

Customer protection is of utmost importance when it comes to PPIs. Regulatory measures such as data encryption, multi-factor authentication and compliance with industry standards like PCI-DSS, as well as security protocols involving firewalls, intrusion detection systems, and regular security audits are implemented to ensure secure transactions and protect customer data. PPI issuers also adopt various customer protection practices such as two-factor authentication, encryption technologies and fraud detection systems. These measures aim to provide a secure and trustworthy experience. 

What Is the PPI Limit?

The PPIs limit is ₹50,000 per month, subject to the PPI’s overall limit (not permitted for one type of Small PPI). The limit for loading PPIs via electronic or online means is subject to the PPI’s overall limit.

Updates/News On Prepaid Payment Instruments

India’s prepaid payment instrument landscape is constantly evolving with various updates and developments. Recent news includes regulatory changes to enhance security and customer protection, such as mandatory KYC requirements for specific PPIs. Some innovations in the PPI landscape include new features like the introduction of virtual prepaid cards, prepaid wallets on UPI, Pay Later options, and integration with technologies, such as contactless payments.

In February, the RBI announced that authorised bank and non-bank PPI issuers can now issue PPIs for digital payments across public transport systems, aiming to enhance convenience, speed, affordability, and safety. Additionally, RBI barred Paytm Payment Bank Ltd from accepting deposits, salary credits, subsidies, credit transactions, or top-ups in any customer accounts, wallets, or FASTags after March 15, 2024.

Staying informed about these updates is crucial for users, businesses and other stakeholders to make the most of these digital payment solutions.

Conclusion

Now, you must have learned about the meaning of prepaid payment instruments, types and updates in detail. PPIs play a vital role in the modern digital economy. They offer convenience and accessibility, making transactions easier and faster. PPIs have witnessed evolving trends due to technological advancements and changing consumer behaviours. As new technologies emerge, PPIs are likely to expand even further, revolutionising how we make digital payments.

Frequently Asked Questions

1. What are prepaid payment instruments examples?

Prepaid payment instruments in India include mobile wallets, digital wallets, gift cards and travel cards. Examples include Paytm, PhonePe, and Amazon Pay.

2. What is the difference between UPI and PPI?

PPIs are digital wallets, cards or other tools used to make electronic transactions. UPI is a specific type of PPI that allows instant money transfers between bank accounts.

3. Is a credit card a prepaid instrument?

A credit card is not considered a prepaid instrument. Prepaid instruments include digital wallets, gift cards and mobile wallets, loaded with funds in advance. Whereas, the credit card allows the user to borrow the amount from the issuer up to the pre-approved limit.