What will happen if wallets are made interoperable?
In the past few months, the government has taken several steps to discourage people from using cash and persuade them to switch to digital transactions. Mobile wallets have shown a huge potential to drive the government's agenda. So far, the wallets operate in semi-closed loops and cannot interact with each other. Now, the RBI is considering making wallets making wallets interoperable and opening up the Unified Payments Interface the government backed digital payments network for them.
1. What is Interoperability?
Interoperability is the ability of a computer or any technology to exchange and make use of information between different technology platforms. An example of interoperability is mobile phone connections in India: a customer can switch service provid ers without changing numbers.
2. What does it mean in the Indian financial system?
Interoperability is a consumer-friendly feature. The fact that a customer of an XYZ bank can use his debit or credit card at any other bank's ATM to withdraw money is because the entire ATM network is interoperable. In India, card payments, ATM transactions, and even insur ance policies are inter operable. There has been a push towards getting bank accounts interoperable as well, but that has not hap pened yet.
3. What is the latest buzz around interoperability?
Interoperability in the space of digital wallets was not allowed by the Reserve Bank of India. The latest buzz is that it could be opened up within a short period of time. This would allow, for instance, a Freecharge wallet user to pay to another person using a Paytm wallet, and vice versa. It will also work for merchant payments.
4. How is that important?
The biggest beneficiaries of interoperability will be the wallet users, who will not have to sp cifically look for merchants who accept a certain wallet. With interoperability, they can make payments from a wallet to any merchant who accepts digital payments. This will bring wallets on a part with cards, which are accepted at all networks -be it Visa, MasterCard or RuPay .
5. What are norms that regulate interoperability?
Interoperability means different companies, which are otherwise competing with each other for a larger share of the business, will end up sharing resources. That means there will be a charge put on such interoperable transactions as a cost of using the other company's network.Currently , similar charges are paid for using one bank's ATM card at another bank's ATM beyond a certain number of free transactions in a month. For similar transactions between wallets, the RBI will need to develop rules around interchange fees.
1. What is Interoperability?
Interoperability is the ability of a computer or any technology to exchange and make use of information between different technology platforms. An example of interoperability is mobile phone connections in India: a customer can switch service provid ers without changing numbers.
2. What does it mean in the Indian financial system?
Interoperability is a consumer-friendly feature. The fact that a customer of an XYZ bank can use his debit or credit card at any other bank's ATM to withdraw money is because the entire ATM network is interoperable. In India, card payments, ATM transactions, and even insur ance policies are inter operable. There has been a push towards getting bank accounts interoperable as well, but that has not hap pened yet.
3. What is the latest buzz around interoperability?
Interoperability in the space of digital wallets was not allowed by the Reserve Bank of India. The latest buzz is that it could be opened up within a short period of time. This would allow, for instance, a Freecharge wallet user to pay to another person using a Paytm wallet, and vice versa. It will also work for merchant payments.
4. How is that important?
The biggest beneficiaries of interoperability will be the wallet users, who will not have to sp cifically look for merchants who accept a certain wallet. With interoperability, they can make payments from a wallet to any merchant who accepts digital payments. This will bring wallets on a part with cards, which are accepted at all networks -be it Visa, MasterCard or RuPay .
5. What are norms that regulate interoperability?
Interoperability means different companies, which are otherwise competing with each other for a larger share of the business, will end up sharing resources. That means there will be a charge put on such interoperable transactions as a cost of using the other company's network.Currently , similar charges are paid for using one bank's ATM card at another bank's ATM beyond a certain number of free transactions in a month. For similar transactions between wallets, the RBI will need to develop rules around interchange fees.
