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Reserve Bank of India Aims to Grow Prepaid Services

Jordan Hirschfield by Jordan Hirschfield
June 24, 2022
in Analysts Coverage, Prepaid
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Reserve Bank of India Aims to Grow Prepaid Services

Reserve Bank of India Aims to Grow Prepaid Services

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The Reserve Bank of India has outlined goals to encourage the long-term growth of prepaid services with greater security in transactions. The staff of the Economic Times provides thoughts on the subject:

“This signals the regulator’s intent to encourage innovation in this segment of the payments industry. Nevertheless, its recent communication to fintechs disallowing non-bank prepaid payment issuers from loading their credit lines on to their products has reportedly sent the wallet and ‘buy now, pay later’ industry into a tizzy. RBI’s concern over new-age companies assuming a lender’s role without building sufficient safeguards is not entirely misplaced. An unsecured business can boomerang if not managed properly.”

Increasing levels of innovation coming from outside of traditional financial institutions provides runway to increase oversight at some level without becoming heavy-handed:

“PPI (prepaid instruments) is an evolving area with multiple players and varied business models. Swiftly fine-tuning regulation and supervision for fintechs factoring in the dynamics of the financial sector makes sense. Fintechs must complement, rather than compete with, mainline banking. They can more effectively provide payment and credit services to geographically dispersed populations with small-ticket needs. The union of data, technology and money can transform finance, especially at the small end of the spectrum of individual borrowers, investors and businesses.”

The evolution of regulation will need to be closely monitored both in India and other regions where prepaid services are growing to ensure the continued exploration of innovation in balance with protections for consumers.

Overview by Jordan Hirschfield, Director, Prepaid Advisory Service at Mercator Advisory Group

Tags: FintechfintechsPrepaidPrepaid cardsregulationregulationsRegulatorsReserve Bank of India
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