Your Mobile Wallet is Set to Get More Powerful

Your mobile wallet such as PayTM and MobiKwik is about to get more powerful. Over the past couple of months, RBI has brought some changes that will bring wallets much closer in functionality to a savings bank account. In this post, let’s look at the changes and how that increases the value the wallets offer.

Where Are the Changes to Your Mobile Wallet?

  • Higher Balance: You can keep a balance of up to Rs 2 lacs in a wallet. Earlier, the maximum outstanding limit was Rs 1 lac. This is applicable only for accounts where full KYC is done.
  • Cash Withdrawal from ATM: Earlier, you could withdraw money from ATMs only for wallets issued by banks. Now, you can withdraw cash from an ATM using a wallet issued by non-banks such as MobiKwik too. However, you must have done full KYC with the wallet issuing entity. You can withdraw up to Rs 2,000 per transaction up to a maximum of Rs 10,000 per month. Such withdrawals shall require an additional factor of authentication/PIN. Again, this requires full KYC.
  • Transfer to a bank account: You can do NEFT/RGTS transfers from the wallet. So, you can send and receive money to/from a bank via NEFT/RTGS.
  • Transfer to other wallets: Mobile wallets will now be interoperable. With this, you will be able to transfer money from PayTM to MobiKwik or vice versa.
  • Link UPI address to Wallet: Until now, you could link a UPI address only to a bank account. You are now allowed to link a UPI address to your wallet. For instance, you can now have deepesh@mobikwik as your UPI. You can then do UPI transactions using the MobiKwik app just as you would do from Google Pay, PhonePe or your mobile banking app.

The deadline for interoperability (between wallets) and enabling UPI is March 31, 2022. As I understand, there is no specific deadline for implementing the other changes.


How Mobile Wallets Benefit?

mobile wallets india 2021

Once these changes are implemented, a wallet will be quite similar to a bank account in terms of transaction ability. Yes, you won’t earn interest on your wallet balance or make fixed deposits from your wallet. For that, you still need a bank account. However, when the above changes are implemented, a wallet will be as good as a savings bank account (from a transactions standpoint).

Now, many bank accounts are opened purely for some kind of transaction ease. For instance, you might want to keep bank accounts separate for receiving salary, making investments, and managing monthly expenses. Once wallets become more powerful, the need for opening new bank accounts automatically goes down.

Consider the use case for students. They need banks for withdrawing cash and making small transactions. They can now do that using a wallet such as PayTM (I am referring to PayTM wallet and not PayTM bank). They won’t need a bank account now. Wallets will meet almost all their banking needs.

But why a wallet and not a bank account? Mobile wallets are much ahead of mobile banking apps in ease of use and user experience. You just need to look at the Paytm app and the functionalities it offers. From booking movie tickets to making utility payments to making insurance payments. Everything is so simple. Most of the data is auto-fetched. Single click payments.  Miles ahead of mobile banking apps from even private sector banks such as HDFC and ICICI bank. The banks have lagged far behind. This is also a reason why pure UPI apps such as PhonePe and GooglePay have stolen a march on UPI apps from banks. So, you have a savings bank account, but you don’t use UPI apps from banks, but link your bank account to PhonePe or GooglePay.

I am still not sure whether you will be able to make investments using your wallets. Yes, you can make MF investments or fund your brokerage account through UPI even today. However, currently, UPI addresses can only be linked to bank accounts. Thus, this question would have never arisen. As things stand today, you need to link a bank account to your financial investments. At the same time, this is the domain of SEBI (and not RBI). SEBI is the markets regulator and will hopefully clarify this in the future.

Additional Reading

  1. Prepaid Payment Instruments (PPIs) – (i) Mandating Interoperability; (ii) Increasing the Limit to ₹2 lakh for Full-KYC PPIs; and (iii) Permitting Cash Withdrawal from Full-KYC PPIs of Non-Bank PPI Issuers. Dated May 19, 2021
  2. RBI Statement on Developmental and Regulatory Policies dated April 7, 2021 (Refer to points 9, 10 and 11)

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