What is e-Money?

In India, e-Money is actually the Prepaid instruments (PPIs) issued in the form of Wallets and Cards. Banks, financial institutions or specific entities can issue e-money after obtaining necessary approval / authorisation from RBI under the PSS Act.  E-money is electronically stored electronically in a domestic currency backed by the regulator. The Payment and Settlement Systems Act in India hold the issuers of e-money responsible for the liability of the amount issued by them.

An E-wallet is a digital wallet or a prepaid virtual wallet used for making online transactions including purchase something at a store, through a computer, or a smartphone. An individual by registering his name with the e-wallet issuer can create an e-wallet profile with the service provider linking his debit card/credit card or bank account to the digital wallet. He can then upload the requisite amount to his e-wallet for the online transactions from the linked account. Read more at ‘what is digital wallet‘ to know the details of Company-specific e-wallet, Generic online e-wallet, and Bank Wallets, etc.

Prepaid Payment Instruments (PPIs) have been playing an important role in promoting digital payments.  Prepaid instruments facilitate the purchase of goods and services, remittance facilities, etc., against the value stored in/on such instruments. Further, Interoperability has been allowed among PPIs so that consumers can have the access to a wide number of merchants among the PPI holders and vice-versa, without the need for multiple onboarding by various issuers and acquirers. The above provision benefitted the consumers with multiple payment options and pricing benefits (cashback/discounts). For merchants acceptance of e-money is more attractive as the cost associated with e-Money acceptance including setting-up infrastructure and transaction fees is much lower compared to the traditional card-based payment systems.

Banks and non-bank entities can issue PPIs in the country after obtaining necessary approval/authorization from RBI under the PSS Act. Currently, there are three types of PPIs namely open system PPI, closed system PPI, and semi-closed PPI. These instruments are issued by the banks and non-bank entities against the value paid in advance by the cardholder. The Master Direction issued by RBI in 2017 and subsequent revisions, lays down the eligibility criteria and the conditions for the operation of PSOs involved in the issuance of semi-closed and open system PPIs in the country.