Daijiworld Media Network – New Delhi/Bengaluru (SS)

New Delhi/Bengaluru, Jan 1: In a significant move aimed at enhancing digital payments, the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) have expanded the scope of the Unified Payments Interface (UPI). This new change allows users to link digital wallets and Prepaid Payment Instruments (PPIs) to third-party apps, making transactions smoother and more accessible for consumers across India.

Previously, UPI was limited to bank accounts, with transactions only possible through a bank’s official UPI app or third-party apps. However, the recent update allows users to link full-KYC-compliant PPIs—including digital wallets, gift cards, and metro cards—to their UPI handle via third-party apps. This expansion ensures a wider range of users can make UPI transactions more easily.

In a circular issued by the RBI, it was specified that “a PPI issuer shall enable holders of only its full-KYC PPIs to make UPI payments by linking its customer PPIs to its UPI handle. UPI transactions from PPI on the issuer's application shall be authenticated using the customer's existing PPI credentials.” This ensures that users can continue to authenticate transactions with their existing PPI credentials, maintaining security and ease of use.

What are PPIs and Full-KYC PPIs?

Prepaid Payment Instruments (PPIs) are financial instruments that store a certain value for transactions. These include digital wallets, gift cards, and metro cards. PPIs offer the convenience of making payments or transferring funds based on the stored value.

A Full-KYC PPI refers to a PPI issued after a complete Know Your Customer (KYC) verification process. This process requires users to submit official documents like an Aadhar card, passport, or voter ID. Full-KYC PPIs offer broader functionality, including making payments, transferring funds, and withdrawing cash. In contrast, non-full-KYC PPIs may have limited functions.

This integration is expected to offer users more flexibility, enabling them to use funds stored in their digital wallets for a variety of transactions, from everyday purchases to peer-to-peer transfers. Importantly, transactions using PPIs will require pre-approval before being processed through the UPI system, adding an additional layer of security.

In addition to digital wallets, the changes also impact WhatsApp Pay, which can now extend UPI services to its entire user base in India. The NPCI has removed the previous user onboarding limit for WhatsApp Pay, allowing it to onboard users without restrictions. This is a significant step, as WhatsApp Pay can now offer UPI services to all its users, further integrating UPI into mainstream digital payments.

With these developments, the RBI and NPCI aim to strengthen India's digital payment ecosystem, ensuring smoother and more accessible transactions. This move supports the government's vision of a Digital India, making UPI a versatile and widely accessible tool for users across the country.