All about Prepaid Payment Instruments (PPI)

Every sector in this world is drastically improving with the internet, social media, technology, and many other instruments like the above. The advancement is not limited to the IT sector, but it has also penetrated the world of Finance.

Prepaid Payment Instruments (PPI) are one such advanced payment method introduced into the world of Finance with continuous improvisations. It has a mission to improve and make the lives of people easy.

What are PPIs?

PPIs stand for Prepaid Payment Instruments. In a layman’s language, they are called digital wallets and e-wallets.

These wallets help purchase services or products with the money in the wallet, which the customer then repays at the end of their billing cycle. The money in the PPIs is stored in electronic form.

How is the functioning of PPIs?

The functioning of PPIs is effortless as it involves only three channels:

• PPI Issuer:
They are the people who issue electronic wallets to customers or organizations. They have pre-signed acceptance agreements with various merchants who agree to accept fund transfers or remittances through PPIs.

• Holder:
They are people who use their electronic wallets money to purchase products and services of their choice and repay it at the end of a billing cycle.

• Merchants:
They are the financial institutions that supply the funds to the PPIs who engage different customers like individuals or organizations for use. They have an agreement or contract with the PPIs for the same.

What are the types of PPIs available in India?

India is a developing nation, and it has a solid customer base that can accept technological advancements in different sectors.

There are three major types of PPIs available in India:
• Closed System PPIs.

• These are a type of PPIs that allow their users to shop products or services limited to the same PPI Institution.

• They cannot provide access to the customers to use their funds in the wallet to be used for other purchases.

• The best example of this setup is a Metrorail Card.

• Semi-closed System PPIs.

• These types of PPIs are a little broad-minded and provide their customers with a narrow window of shopping at a selected group of merchants or locations, or establishments.

• The PPIs clearly define the selected group of merchants to avoid further confusion.

• They are primarily issued by the banking sector and approved by RBI.

• Non-banking sectors can also issue it with the authorization of RBI.

• The best example of this type is the Paytm wallet.

• Open System PPIs.

• These types of PPIs are broad-minded financial institutions that majorly constitute banks authorized by RBI.

• They allow their users to use PPIs to purchase products or services.

• The best examples are Debit and Credit Cards.

What is the future of PPIs in India?

PPIs are being accepted and used by the citizens of India widely. They are solving the emergency availability of money, making the PPIs grow in the market faster. This form of payment is here to stay and run the longest race in the country.

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