There is no shortage of payment options in India. Besides cash, credit and debit cards, there is Unified Payments Interface and several digital wallets like Paytm. The Reserve Bank of India this week has permitted another option — a semi-closed prepaid payment instrument (PPI) that can be used to purchase goods and services. But it cannot be used to make fund transfers.
Says Hrushikesh Mehta, country manager, India, ClearScore: “It will help drive digital payments because not having a digital know-your-customer (KYC) mechanism is one of the biggest constraints to driving penetration of payment tools. This is a payment tool to help drive digital payments (since the bank would have already done the KYC of the customer), while ensuring protection against money laundering.”
This PPI can be used only up to a limit of Rs 10,000 per month and the total amount loaded during the financial year shall not exceed Rs 1.2 lakh.
Naveen Kukreja, co-founder and chief executive officer, Paisabazaar.com, says: “The new PPI can be issued both as a card and in electronic format. While both banks and non-banking entities can issue this new PPI instrument, it can only be loaded from a bank account.”
The details include mobile number verified with a one-time password and a self-declaration of name and unique identity/identification number of any ‘document like a passport, driving licence, Aadhaar number, etc.
Anuj Shah, chief financial planner of Wealth360, says, “Those who don’t want to expose their bank balances while using a debit card can use this prepaid card and reduce risk. The amount exposed will be only Rs 10,000.”
But that’s not the only advantage. Shah says, “For people who want to keep a tight budget, they can load an amount and use only these cards for daily spending.
It will help you with better cash flow management and consolidate all expenses in one place. This minimises exposure to potential fraud.”
Remember debit cards give value-additions like reward points, while digital wallets like Paytm give cashback. Will this product offer any value additions, apart from benefits like lower risk and an excellent budgeting tool? It depends on the issuers to drive loyalty, adds Mehta.
But when it comes to safety, this card will be on a par or perhaps even better. The only possible disadvantage is if it gets misused. But that’s unlikely, given how robust the two-factor authentication is (unless it’s used on international sites). But then you are protected by the value cap. It can be also be given to children for daily and monthly expenses.