RBI permits third-party UPI apps to process payments from PPI wallets

The Reserve Bank of India (RBI) has allowed holders of full-KYC Prepaid Payment Instruments (PPIs) to conduct Unified Payments Interface (UPI) transactions via third-party applications.

Previously, PPI holders could only make UPI payments using the mobile application provided by their PPI issuer. This change, announced in April, aims to enhance interoperability and user convenience in digital payments. The then RBI Governor Shaktikanta Das said that the move would boost the adoption of digital payments for small-value transactions.

The revised regulations stipulate that PPI issuers must enable full-KYC wallet holders to link their PPIs to third-party UPI apps. Transactions conducted through these apps will be authenticated using the PPI holder’s existing UPI credentials, streamlining the process for users.

This move is expected to drive further adoption of digital wallets and promote seamless financial transactions, reinforcing RBI’s commitment to fostering innovation in India’s payment ecosystem.

Currently, PhonePe is the top UPI application with nearly 50% market share, followed by Google Pay and Paytm with 37% and 7% market share, respectively. New entrants CRED, Navi, and Flipkart’s Super.money have also seen an uptick in transactions over the past few months.