How are PPI wallets different from UPI? All that you need to know

PPI, or Prepaid Payment Instrument allows individuals to manage their spending without the need for a formal banking relationship

This report has been updated 

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Simple to use and supported by the government, the Unified Payments Interface (UPI) has become the go-to payment option in the country. RBI governor, Shaktikanta Das underlined the significance of increasing the global footprint of online payment mechanisms like UPI. He said that this can be used to facilitate easier cross-border payments.

  What is a PPI wallet?  At its onset, the concept of Prepaid Payment Instrument (PPI) wallets is not very different from that of physical wallets. Like physical wallets, money has to be put into PPI wallets for them to be useful. Unlike a usual UPI transaction, payments made from PPI wallets do not need your bank account. However, not all UPI applications have the facility of PPI wallets. At this point, UPI apps including Mobikwik, and Amazon Pay offer the feature of a PPI wallet.  In its order dated March 31, 2022, RBI mandated the interoperability for PPI wallet of QR codes. Now, Users can transfer money from PPI wallets to other PPI wallets as well as bank accounts. 

UPI wallets ensure a smooth transaction experience. It does not need you to enter your PIN as it is a pre-approved transaction which means PPI issuer and UPI app provider for PPI wallet are the same. 

 

  How do UPI and PPI transactions work?  To leverage UPI-based payment facilities, a user needs to link his bank account to an application that supports UPI payments. For a bank account to be linked to a UPI application and UPI PPI wallet, the sim card of the phone number registered with the bank has to be present in that device.  When a user begins a payment, an interface opens that asks for the UPI pin to validate the payment. Payment is thus processed with direct bank involvement.   Are there any additional charges to use PPI wallets?  In its directive dated March 2023, the National Payments Corporation of India (NPCI) stated that an interchange fee of 1.1 per cent will only be applicable for the PPI merchant transactions and there will be no charge to customers. Moreover, interchange will not be applicable for small offline merchant payments for transaction value below Rs 2,000.