The Indian banking sector plays a vital role in shaping the nation’s economy, acting as a key

driver of financial growth and stability. With rapid technological advancements and evolving
customer expectations, banks have been compelled to adopt innovative practices. The
emergence of globalisation, liberalisation, and privatisation has further accelerated this
transformation. Today, technology is at the core of banking operations, offering high-speed
and efficient services. Innovations such as mobile banking, internet banking, ATMs, and
digital payments have revolutionised the customer experience. The focus has shifted
towards 24×7 accessibility and instant transactions. Indian banks are now investing heavily in
research and development to stay competitive. With around 340 banks in operation, the
sector continues to evolve rapidly. By 2020, India’s banking sector had become the fifth
largest in the world.

Technology has opened up new markets, new products, new services and efficient delivery
channels for the banking industry. The various technological platforms provided by the banks
to its customers bring greater flexibility and operational convenience by providing
computerised banking environment. Major technology and innovation banking sector in India
are:
 Applications programming interface(API)
 Innovation Labs
 UPI
 Digital Wallets
 Wearable Technology
 The 3 Big B’s
 Real time gross settlement(RTGS)
 National Electronic Funds Transfer (NEFT)
 Electronic fund transfer
 Point of sale (POS)
 Electronic Clearing Service (ECS)
Application Programming Interface:
An API (Application Programming Interface) is a tool that helps connect, link, and coordinate
a service’s database with any application. In the banking system, APIs work in a similar way.
They connect a bank’s database (which stores customer information) with different apps or
programs. This creates a network that helps promote various services, payments, and products
suitable for each customer. The main benefits of APIs include saving costs, improving
services, and making operations more efficient.
Innovation Labs:
Many banks have adopted proactive strategy by establishing their own internal innovation
labs. Innovation labs operate with the primary objective of evaluating and adopting emerging
technologies and contribute to banks motive of digitalization. Eg: AXIS Bank has set up its
Innovation Lab named Thought Factory.
UPI:
National Payments Corporation of India (NPCI) launched Unified Payments Interface (UPI)
in 2016 with 21 member banks. UPI is a system that powers multiple bank accounts into a
single mobile application, merging several banking features and seamless fund routing. UPI
has been considered as the revolutionary product in payment system. Example: BHIM
app,Google Tez,Paytm,SBI Pay,BOB UPI,Axis Pay
Digital Wallets:
Digital Wallets allow an individual to make electronic transactions using a smartphone.
Awareness and use of e-wallets increased post demonitisation in India. It is indeed one step
towards “less cash” economy. Example: mRupee, ICICI Pockets,HDFC PayZapp,Citi
MasterPass,YONO SBI
Wearable Technology:
“To wear your bank on your wrist” is a reality today. Smart watch banking helps the
customers check their balance, get fraud alerts, carry out both financial and information
transactions and offers many more services, all on their wrist. In India, ICICI has launched an
app named iWear for all smart watches. ICICI is among few global players allowing
transactions using this app on both Apple and Android platforms. As technology is redefining
banking, wearable banking and transactions via smart watches and smart glasses is gearing up
as a key trend.
The 3 Big B’s:
The 3 Big B‟s prominently trending today in Indian banking sector are Biometrics,
Blockchain and Big Data Analytics.
1) Biometrics: - Biometrics technology makes use of biological data and behavioural
characteristics that differentiates one human being from another. Biometrics is secure and
cost-effective method for authentication process of the customers of the bank. It eliminates
the burden of remembering passwords, PINs and card numbers.
Biometrics application in banking sector
2) Blockchain: - A blockchain is a data structure that is used to create a digital ledger(record)
of transactions and share it among a distributed network of computers. The underlying
principle used is cryptography, wherein each participant on the network is allowed to
manipulate the ledger in a secure way without the need for a central authority.
3)Big Data Analytics :- Big Data are said to be extremely huge data set that has to be
analysed, handled, managed and validated through typical data management tools. Indian
banks have millions of customers. The data of these customers is stored in the database.
Retrieving the data in meaningful manner becomes a complex process as many times the data
collected is unorganized. Big Data Analytics helps in resolving this problem. To achieve
competitive edge in today’s modern banking era, banks in India are using data analytics to
attract new customers, retain them and make the entire process consumer centric.
Real time gross settlement (RTGS):
Real time gross settlement is a fund transfer system. Settlement in “real time” means the
transactions happen almost immediately “gross settlement “means transaction is settled one
to one basis. This is mainly used for transaction which high in value and need to be cleared
immediately.
Real Time Gross Settlement system, introduced in India since March 2004, is a system
through which electronics instructions can be given by banks to transfer funds from their
account to the account of another bank. The RTGS system is maintained and operated by the
RBI and provides a means of efficient and faster funds transfer among banks facilitating their
financial operations.
National Electronic Funds Transfer (NEFT):
According to Reserve Bank of India, National Electronic Funds Transfer (NEFT) is a nation-
wide payment system to facilitate one-to-one funds transfer. Under NEFT, individuals, firms
and corporates can electronically transfer funds from any bank branch to any individual, firm
or corporate having an account with any other bank branch in the country participating in the
Scheme. The funds under NEFT can be transferred by individuals, firms or corporates
maintaining accounts with a bank branch. Even individuals not having a bank account can
deposit cash at the NEFT-enabled branches with instructions to transfer funds using NEFT.
However, such cash remittances will be restricted to a maximum of Rs.50, 000/- per
transaction. Such walk-in-customers have to furnish full details including complete address,
telephone number, etc. NEFT, thus, also help in transfer of funds even without having a bank
account. This is a simple, secure, safe, fastest and cost effective way to transfer funds
especially for Retail remittances.
Electronic Fund Transfer :
Electronic Fund Transfer (EFT) is a method of sending money directly from one bank
account to another without using any paper cash. One common example is direct deposit.
EFT involves transferring money through electronic terminals like credit cards, ATMs, and
point-of-sale machines. It can be used for both sending (credit transfer) and receiving (debit
transfer) money. These transactions are handled through the Automated Clearing House
(ACH) network. As EFT becomes more popular, especially for paying bills online, it is
helping to create a paperless system where checks, stamps, envelopes, and paper bills are no
longer needed. EFT also helps reduce administrative costs, improves efficiency, makes
bookkeeping easier, and increases security.
Point of sale (POS):
Point of Sale Terminal is a computer terminal that is linked online to the computerized
customer information files in a bank and magnetically encoded plastic transaction card that
identifies the customer to the computer. During a transaction, the customer's account is
debited and the retailer's account is credited by the computer for the amount of purchase.
Electronic Clearing Service (ECS):
Electronic Clearing Service is retail payment systems that can be used to make bulk
payments/receipts of a similar nature especially where each individual payment is of
repetitive nature and of relatively smaller amount. This facility is meant for companies and
government departments to make/receive large volumes of payments rather than for funds
transfers by individuals.
CHALLENGES
Automation and AI may lead to unemployment -
AI and automation are the major breakthroughs of today‟s innovation era. Although the
benefits are promising, technology revolution poses a great threat to many of the jobs which
will be completely automated and opportunities for job seekers will shrink. Banking is no
exception to this fact.
Voice Revolution will takeover online banking -
As voice recognition and voice authentication mature, web traffic to banking sites and mobile
applications may drop by 50% in next few years. Customers will simply TALK to an internet
connected device and perform most common banking tasks within few seconds. Drop in web
traffic due to voice recognition systems could pose a serious threat to banking industry. The
customers who currently visit the websites for banking tasks, also go through the marketing
promotions on the site. The banks may lose the opportunity to cross sell current customers
with drop in web traffic.
Issues related to Biometrics Operational issues –
A minor could change the voice quality and may pose problems in speech authentication.
People who work in labour intensive jobs may have damaged fingerprints. Even the senior
citizens may have problem in fingerprint authentication.
Security issues in its note on 'Digital Payments –
Analyzing the cyber landscape', KPMG mentioned, cybersecurity is one of the most critical
challenges faced by stakeholders of the digital payment ecosystem. With more and more
users preferring digital payments, the chances of getting exposed to cybersecurity risks like
online fraud, information theft, and malware or virus attacks are also increasing. Lack of
awareness and poor digital payment ecosystem are some of the primary reasons that have led
to increase in these attacks.
Digital literacy in rural areas -
There has been considerable growth in the users of smartphone in rural India in last few
years. But not many are aware and confident about online banking through smartphones. The
primary usage of smartphone is restricted to entertainment and communication only. As the
urban tech savvy customers adopt the changing landscape of ICT innovation in banking,
Indian rural population yet needs to be educated about the concepts of AI, Biometrics,
Blockchain, Big Data etc.

Payment banks are designed to deliver accessible and affordable banking services to
underserved segments of society, including low-income households, small businesses, and
migrant workers. These banks focus on financial inclusion by providing essential services
that traditional banks might not offer to these groups. In this article, we will define what a
payment bank is, explore how it operates, and highlight the top payment banks in India in
2025.
What Are Payment Banks?
Payment banks are specialized financial institutions designed to provide basic banking
services to the underbanked and unbanked population. They offer a limited range of products
and services, focusing on facilitating financial transactions and promoting financial inclusion.
Unlike traditional banks, payment banks cannot issue loans or credit cards. Their primary
function is to provide safe and convenient access to banking services, such as deposits,
withdrawals, remittances, and payments, primarily through digital channels.
Features of Payment Banks
Some of the key features of payment banks are:
Payment banks offer a range of basic financial services to the underbanked and unbanked
population. Key features include:
Deposit Accounts
Customers can open savings and current accounts with a maximum balance limit of
₹200,000.
Debit Cards
Payment banks issue debit cards for ATM withdrawals and POS transactions.
Money Transfers
Facilitate domestic and international bank transfers of funds through various modes, such
as NEFT (national electronic fund transfer), IMPS (immediate payment service), UPI (unified
payments interface), and AEPS (Aadhaar-enabled payment systems).
Mobile Banking
Offering convenient banking services through mobile apps, including balance inquiries, fund
transfers, and bill payments.
Agent banking
Expanding reach through a network of business correspondents in rural and semi-urban areas.
Basic Financial Services
Providing essential services like utility bill payments, mobile recharges, and insurance
products.
Investment Restrictions
Funds are primarily invested in government securities with a maturity period of up to one
year.
Leverage of Technology
Employing biometric authentication, QR codes, and NFC technology to enhance security and
convenience for customers.
Partnerships and Collaborations
Payment banks collaborate with financial institutions and service providers to offer a wider
range of financial products, such as insurance, mutual funds, and pensions, enhancing their
service offerings.
List of Payment Banks in India (2025)
Below is a list of some popular payment banks in India:
Payment
Bank Established Name Headquarters Unique Features

First payment bank to launch in

India (January 2017), extensive
network of over 500,000 banking
points through Airtel retail outlets,
Airtel offers 2.5% interest rate on savings
Payments Bharti Airtel accounts and free personal accident
Bank Limited New Delhi insurance cover of Rs. 1 lakh.

Integration with Paytm app, over

350 million registered users, offers
Paytm One97 2.5% interest rate on savings
Payments Communications accounts, cashback, and transaction
Bank Limited Noida rewards.

Leveraging post office network,

India Post focus on rural and low-income
Payments Department of segments, offers a range of
Bank Posts New Delhi financial services beyond banking.

Strong presence in rural and low-

income segments (accounts for
70% of its customer base), offers
Fino 5% interest rate on savings
Payments Fino Paytech accounts, micro ATM, doorstep
Bank Limited Mumbai banking.

Integration with Jio ecosystem,

Jio potential for large user base due to
Payments telecom network, focus on digital
Bank Reliance Jio Mumbai payments and financial services.

Technology-driven approach,
backed by the National Securities
NSDL National Securities Depository Limited, offers financial
Payments Depository market-linked products and
Bank Limited Mumbai services.
What are the Permissible Activities of Payment Banks?
Payment banks are designed to provide essential banking services to underserved
populations. Here are the key permissible activities they can engage in:
Accepting Deposits
Payment banks can accept deposits from individuals, small businesses, and other entities,
with a maximum limit of ₹2 lakh per customer.
Facilitating Money Transfers
They enable quick and secure money transfers, both domestically and internationally,
providing a vital service for migrant workers and others who need to send money across
borders.
Issuing Prepaid Instruments
Payment banks can issue prepaid instruments, such as debit cards and mobile wallets,
allowing customers to make cashless transactions conveniently.
Offering Basic Financial Services
Customers can open savings accounts, current accounts, fixed deposits, and recurring
deposits with payment banks, enjoying attractive interest rates and minimal charges.
Distributing Third-Party Products
Payment banks can distribute third-party financial products, including insurance, mutual
funds, pensions, and government schemes, expanding their service offerings to meet
customers’ diverse needs.
Acting as Business Correspondents
In remote areas, payment banks can serve as business correspondents for other banks,
providing essential banking services where traditional banks may not be present.
Benefits for Customers in Remote Areas
 Secure Deposits: Customers can deposit funds securely and earn interest on their
savings, even in areas where traditional banks are scarce.
 Convenient Money Transfers: The ability to transfer money quickly and at low cost
is crucial for those supporting family members or conducting business across
distances.
 Access to Cash and Payments: With net banking, mobile banking, or debit cards,
customers can access cash and make payments anytime, anywhere, without the need
for intermediaries.
  Comprehensive Financial Solutions: Payment banks offer a range of products and
services, from savings accounts to insurance, catering to the financial needs of
customers.
 Financial Literacy Programs: Payment banks, often in collaboration with their
partners, conduct financial literacy and awareness programs, helping customers make
informed financial decisions.
What are the Restricted Activities of Payment Banks?
Payment banks are subject to specific restrictions to ensure they remain focused on their core
mission of providing basic banking services. Some of these restricted activities include:
Deposit Limitations
Payment banks cannot accept deposits exceeding ₹2 lakh per customer.
Prohibition on Lending
They are not allowed to extend loans or issue credit cards, ensuring they do not engage in
high-risk credit activities.
No NRI Deposits
Payment banks cannot accept deposits from Non-Resident Indians (NRIs), limiting their
customer base to residents.
Restrictions on Investments
Establishing subsidiaries, forming joint ventures, or investing in other entities requires prior
approval from the Reserve Bank of India (RBI).
Prohibited Activities
Any activities not explicitly permitted by the RBI or the government are restricted, keeping
the operations of payment banks streamlined and focused.
Reasons Behind These Restrictions
 Financial Stability: The restrictions help prevent payment banks from growing too
large and posing systemic risks to the banking sector and the broader economy.
 Risk Management: By avoiding lending and investment activities, payment banks
are protected from credit, market, and operational risks that could compromise their
stability.
 Security and Compliance: These limitations help safeguard payment banks from
becoming conduits for money laundering, terrorist financing, fraud, and other illegal
activities, preserving their reputation and trustworthiness.
 Focused Innovation: The constraints encourage payment banks to innovate within
their niche of small-scale deposits and payment services, rather than competing in the
broader and more crowded lending market.
Development of Payment Banks in India:
 India introduced payment banks as part of its efforts to promote financial inclusion.
 In 2014, the Nachiket Mor committee proposed two types of differentiated banks,
namely payment banks and small finance banks.
 The RBI published guidelines for licensing of payment banks in 2014 and approved
11 entities, out of which six started operations.
 These six banks are Airtel Payments Bank, Paytm Payments Bank, India Post
Payments Bank, Fino Payments Bank, Jio Payments Bank, and NSDL Payments
Bank.
What is the Difference Between a Normal Bank and a Payment Bank?
Payment banks and traditional commercial banks share some similarities but differ
significantly in terms of their scope and services offered.
Key Differences:
 Product offerings: Commercial banks offer a wide range of financial products,
including loans, credit cards, investment products, and insurance, while payment
banks are restricted to basic banking services like deposits, withdrawals, remittances,
and payments.
 Deposit limits: Payment banks have a maximum deposit limit per customer, whereas
commercial banks have no such restrictions.
 Investment restrictions: Payment banks primarily invest in government securities,
while commercial banks have a broader investment portfolio.
 Loan services: Commercial banks offer various loan products, including personal
loans, home loans, and business loans, while payment banks cannot provide any form
of credit.
 Branch network: Commercial banks typically have a larger and more extensive
branch network compared to payment banks, which often rely on agent banking for
wider reach.
Regulations Under Payment Banks
The regulatory framework governing payment banks consists of the following elements:
 Licensing Requirements: The RBI issues licenses to eligible entities, such as
telecom companies, non-banking finance companies, prepaid payment
instrument issuers, and others, subject to certain conditions and criteria.
 Guidelines: The payment banks must maintain a minimum paid-up equity capital of
Rs.100 crore, have at least 51% of their shareholding owned by Indian residents, have
a diversified board of directors, and adhere to corporate governance and prudential
norms.
  Supervision: The RBI supervises the operations, performance, compliance, and risk
management of payment banks through periodic reporting, inspection, audit, and
review. The RBI additionally has the power to impose penalties, cancel licenses, or
take other corrective action in case of any violation or irregularity by the payment
banks.
Latest Updates on Payments Banks
The RBI may revise or amend the regulations governing payment banks from time to time
based on the industry’s feedback, experience, and developments. Some of the recent updates
or changes in regulations affecting payment banks are:
1.
1. In August 2019, the RBI increased the maximum balance limit for payment
bank customers from Rs. 1 lakh to Rs. 2 lakh to encourage more savings and
deposits in payment banks.
2. In September 2019, the RBI allowed payment banks to apply for small finance
bank licenses after completing five years of operations to enable them to offer
diverse products and services, such as lending and credit.
3. In October 2019, the RBI permitted payment banks to become authorised
dealers in foreign exchange to facilitate cross-border customer remittances and
transactions.
4. In February 2020, the RBI issued a draft circular on the guidelines for on-tap
licensing of payment banks to encourage more entities to enter the space and
foster competition and innovation in the sector.

Contemporary Developments in the Banking Sector Considering the Payment and

Settlement Systems Act, 2007:
The Indian banking sector has witnessed remarkable transformations in recent years, majorly
driven by technological advancements, regulatory reforms, and policy innovations. One of
the most significant enablers of this change is the Payment and Settlement Systems Act,
2007. This Act provides a legal framework for the regulation and supervision of payment
systems in India and has been a cornerstone in shaping the contemporary payment
infrastructure.

1. Overview of the Payment and Settlement Systems Act, 2007:

The Payment and Settlement Systems Act, 2007 was enacted to regulate and supervise the
payment systems in India. It empowers the Reserve Bank of India (RBI) to:

 Regulate and oversee all payment systems in the country,

 Authorize entities to operate payment systems,
  Lay down policies relating to the regulation of payment systems,
 Issue directions and guidelines to operators of payment systems.

The Act has played a crucial role in modernizing the banking and financial ecosystem by
ensuring secure, efficient, and accessible payment and settlement mechanisms.

2. Rise of Digital Payments:

One of the most prominent developments in the banking sector is the explosive growth of
digital payments. The Act facilitated the creation of a regulated environment for innovations
such as:

 Unified Payments Interface (UPI): A real-time payment system developed by NPCI

under the RBI’s guidance that allows instant money transfers between bank accounts.
 Bharat Interface for Money (BHIM): A mobile app leveraging UPI for simple, secure
payments.
 National Electronic Funds Transfer (NEFT) and Real-Time Gross Settlement (RTGS)
systems have also been modernized under this legal framework.

These systems have revolutionized the way money is transacted, promoting transparency,
financial inclusion, and ease of doing business.

3. Emergence of FinTech and Payment Banks:

The payment and settlement ecosystem has witnessed the rise of FinTech companies, digital
wallets (like Paytm, PhonePe, Google Pay), and Payment Banks (like Airtel Payments Bank,
India Post Payments Bank). These entities, operating under RBI’s guidelines framed under
the 2007 Act, have increased competition and improved service delivery in the financial
sector. They provide basic banking functions such as:

 Deposits,
 Digital transactions,
 Bill payments,
 Remittances, etc.

4. Regulatory Sandboxes and Innovation Frameworks:

The RBI, under the powers conferred by the Act, has introduced Regulatory Sandboxes—
controlled environments where FinTech companies can test their products under regulatory
supervision. This approach encourages innovation while ensuring safety and customer
protection.

5. Cybersecurity and Risk Management:

With the rise in digital transactions, cybersecurity and risk management have become crucial
areas of focus. The Payment and Settlement Systems Act empowers the RBI to issue
directives on:

 Data protection,
 Fraud detection and prevention,
  Transaction monitoring,
 Dispute redressal mechanisms.

This has led to the development of secure systems like Tokenization, Two-Factor
Authentication, and Real-time Fraud Detection Systems.

6. Interoperability and Inclusivity:

Another key development enabled by the Act is the interoperability of payment systems. For
example, wallets can now interact with UPI, bank accounts, and QR codes. This promotes
convenience, competition, and customer choice.

Additionally, initiatives like Jan Dhan Yojana, Aadhaar Enabled Payment Systems (AEPS),
and the Direct Benefit Transfer (DBT) framework integrate seamlessly with the regulated
payment infrastructure to enhance financial inclusion.

7. Role of the RBI and NPCI:

The RBI, along with the National Payments Corporation of India (NPCI)—a not-for-profit
entity established under the provisions of the Act—has been instrumental in managing and
expanding the payment landscape. NPCI has introduced multiple payment products such as:

 IMPS (Immediate Payment Service),

 NACH (National Automated Clearing House),
 FASTag for toll payments,
 RuPay cards.

These innovations have made the Indian payment ecosystem among the most advanced
globally.

8. Cross-Border and Real-Time Payments:

Recent developments include efforts towards enabling cross-border UPI transactions, linking
with other countries’ payment systems like Singapore’s PayNow, and enabling real-time
remittances. These initiatives align with the global trends of seamless international money
movement.

WHAT IS A DIGITAL WALLET?

A digital wallet (or electronic wallet) is a software-based system or an application that runs
on any connected device. It stores your payment information and passwords of numerous
payment methods and websites. Digital wallets run primarily on mobile devices but may be
accessible from a computer — mobile wallets, which are a subset, are primarily used on
mobile devices.
Digital wallets allow you to pay when you're shopping using your device so that you don't
need to carry your cards around. You enter and store your credit card, debit card, or bank
account information and can then use your device to pay for purchases.
Digital wallets can also store:
 Gift cards, Membership cards, Loyalty cards, Coupons, Event tickets, Plane and
transit tickets, Hotel reservations, Driver's license ( only in some states as of now, AZ,
CO, GA, MD), Identification cards, Cryptocurrency, Car keys
Key Takeaways
 Digital wallets are financial applications that allow you to store funds, make
transactions, and track payment histories on devices like phones and tablets.
 You can store all of your financial information in a digital wallet; some even let you
store identification cards and driver's licenses.
 Digital wallets may be included in a bank's mobile app or payment apps like PayPal
or Alipay.
 Digital wallets allow people in financially underserved parts of the world to access
financial services they may not have been able to before.
How a Digital Wallet Works
Digital wallets are applications designed to take advantage of the abilities of mobile devices
to improve access to financial products and services. Digital wallets essentially eliminate the
need to carry a physical wallet by storing all of a consumer's payment information securely
and compactly.
Digital wallets use a mobile device's wireless capabilities like Bluetooth, WiFi, and magnetic
signals to transmit payment data securely from your device to a point of sale designed to read
the data and connect via these signals.
Currently, the technologies used by mobile devices and digital wallets are:
 QR codes: Quick response codes are matrix bar codes that store information. You use
your device's camera and the wallet's scanning system to initiate payment.
 Near field communication (NFC): NFC is a technology that allows two smart
devices to connect and transfer information using electromagnetic signals. It requires
two devices to be close to each other to connect.
 Magnetic secure transmission (MST): This is primarily for Samsung mobile phone
users. It is the same technology used by magnetic card readers that read your card
when you swipe it through a slot at a point of sale. Your phone generates this
encrypted field that the point of sale can read. Samsung has phased out MST features
for Samsung phones from 2021 onwards to focus on NFC, which is more prevalent.12
The card information you've stored in your wallet and choose to use for a transaction is
transmitted from your device to the point-of-sale terminal, which is connected to payment
processors. Then, through the processors, gateways, acquirers, or any other third parties
involved in credit and debit card transactions, the payment is routed through the credit card
networks and banks to make a payment.
Types of Digital Wallets
There are several digital wallets available. Here are some of the most well-known:
Cash App, Apple Pay, Google Wallet, Samsung Wallet, PayPal, Venmo, AliPay, Walmart Pay,
Vodafone M-PESA
Most wallets attempt to distinguish themselves from their competitors with different methods.
For example, Google's digital wallet service allows you to add funds to the wallet on your
phone or device.
Apple, on the other hand, entered into a strategic partnership with Goldman Sachs to issue
Apple credit cards and expand its Apple Pay services.4
Age Requirements for Using a Digital Wallet
Most makers of digital wallets place age restrictions on young users. For example, if you're
not yet 18, you can't open your own Apple Pay account; however, Apple does offer "Apple
Cash Family," where children or teens as part of a family can send or receive money with
Messages and Wallet and make purchases with Apple Pay. Parents would need to create and
authorize this from their own accounts.56
Cash App segregates the types of services available to those 18 and younger. For example, if
you are below 18, you can pay someone else or receive funds—up to $1,000 every 30 days,
in peer-to-peer transactions. Borrowing, check deposits, cross-border payments, and phone
support are available only to those 18 and older.7
Pros and Cons of Digital Wallets
Pros
 Limits exposure for financial and personal information: Having a digital wallet
adds security for your credit cards and identification.
 Ends carrying a physical wallet and cards: Possessing forms of payment and ID in
your mobile device means you can carry less, avoiding the chance of losing those
items.
 Can improve financial services access: The availability of digital wallets gives
people in underserved areas more options for payment and commerce.
Cons
 May not be accepted everywhere: Smaller shops or less-developed areas may not be
set up to accept payment via a digital wallet.
 May not work if Bluetooth or WiFi isn't available: If an Internet setup or electronic
point-of-sale network isn't functioning, it may not be possible to pay using a digital
wallet.
  Vulnerable to identify theft or fraud: If your mobile device is stolen and isn't
protected by a password or biometric data, or if your digital wallet is hacked, you
could suffer criminal use of the information.
Digital wallets don't require a bank account at a bank with a physical branch. Instead, you can
place your funds in an online-only bank—which
gives unbanked and underbanked communities access to financial services, enabling broader
financial inclusion.
Security might become an issue if you use a digital wallet from a provider that hasn't been
vetted or doesn't have an established reputation. If your phone isn't password-protected, you
risk giving someone else access to your finances if you lose your phone. Additionally, there
might be local businesses you prefer to shop at that don't yet have a point of sale that accepts
this technology.

PPI:
The Indian banking sector has witnessed a significant transformation in recent years, with
technology acting as a major catalyst. Among the most prominent innovations are Prepaid
Payment Instruments (PPIs), which have emerged as vital components in the digital payment
ecosystem. They offer a convenient, secure, and efficient alternative to cash transactions and
traditional banking, especially in the wake of growing financial inclusion and the
government’s push towards a cashless economy.

Definition and Meaning of PPIs:

Prepaid Payment Instruments (PPIs) are instruments that facilitate the purchase of goods
and services, including funds transfer, against the value stored on such instruments. The
amount is pre-loaded into the instrument, and transactions can be made up to the available
balance.

PPIs are regulated by the Reserve Bank of India (RBI) under the Payment and Settlement
Systems Act, 2007, and the latest Master Directions on PPIs were issued in 2021.

Types of PPIs:
According to the RBI, PPIs in the country can be issued under three systems. They are as
follows:

1. Closed system: The close system is a system where the PPI that is issued is only valid
when used against purchases from the entity which issued it in the first place. The use of such
a PPI will be invalid when a person tries to purchase items or services from a different
provider. This system also does not allow cash withdrawal against the amount that is stored in
the PPI. Since this system of PPI is not classified as a payment system by the RBI, the
issuance of such PPIs does not require the prior approval of the RBI. Examples of a closed
system PPI are paper vouchers or gift vouchers and coupons; it also will include smart cards
that can only be used in the establishments that issue them such as metro railcards and chips.
2. Semi-Closed System:
Prepaid Payment Instruments (PPIs) under the semi-closed system can be used at more than
one place, but not everywhere. Unlike closed system PPIs that are limited to one merchant or
company, semi-closed PPIs can be used at several specific merchants. However, they cannot
be used at all stores or platforms.

These PPIs can only be issued by banks approved by the Reserve Bank of India (RBI), or by
non-banking financial institutions that are authorised by the RBI. No one is allowed to issue
PPIs without getting permission from the RBI first.

Users can use semi-closed PPIs to buy goods or services or to send money, but only at a
group of merchants who are clearly identified. These merchants may be chosen based on their
location or because they have a direct agreement with the issuer. This agreement doesn't
always have to be direct—it can also be made through a payment gateway or a payment
aggregator.

Just like closed system PPIs, semi-closed PPIs also cannot be used to withdraw cash. This
rule applies whether the PPI is issued by a bank or any other authorised entity.

3. Open system: PPIs under this system can only be issued by banking institutions that have
been approved by the RBI. These instruments can be used to facilitate purchases,
remittances, cash withdrawals, etc. examples of PPIs issued under this system are debit
cards and credit cards. Two types of Banks: Normal Banks and Payment banks.

Types of Semi-Closed PPIs

There are three types of semi-closed PPIs. Depending on the type of the PPI, only a certain
amount of money can be loaded onto the instrument. They are as follows:

1. Minimum detail PPI: this type of PPI means that only the bare minimum details of the
holder of the PPI are obtained. Such as only the name and the number on the holder and no
other details such as address, pan number, aadhar number, or bank account details etc. have
not been obtained by the PPI issuer. In such a case, the maximum amount of money that may
be loaded on the PPI is up to Rs 10,000.

2. Loading only from a bank account: In the case where the PPI can only be loaded via the
bank account and not through any other means such as cash etc. the maximum amount of
money that can be loaded onto the PPI is Rs 10,000.

3. Full KYC PPI: where the full KYC of the PPI holder has been obtained and registered by
the PPI issuer the maximum limit of money that can be loaded onto the instrument increases
to Rs 1 lakh.
Customer Protection
The RBI, for the purpose of protecting the holders and acceptors of PPI, are protected from
exploitation and fraud, require the issuer of the PPI to state all the terms and conditions that
are entailed in the usage of the PPI in simple and clear language.

This declaration by the issuer of the PPI has to give special attention to bring to the notice of
the customer the following terms.

 All fees and charges against the usage of the PPI.

 The direct contact information to customer services, such as the phone number,
email address and website URL.
 The validity period of the instrument and the terms and conditions of expiry of the
instruments.
 The terms of depreciation of the value of the instrument if any after the period of
validity is over.

Who Can Issue PPIs?

 With regards to non-banking entities such as companies, the requirements to be met

by them to be eligible to issue PPIs are as follows- – The company must be
incorporated in India. – The minimum paid-up capital of the company must be more
than Rs 5 crore. – Minimum positive net worth must be Rs 1 crore at all times.
 When it comes to banking institutions, all banks which comply with the eligibility
criteria established by the RBI are allowed to issue PPIs. But when it comes to
providing Mobile Banking Transactions, only banks that have been approved by the
RBI may launch mobile-based PPIs.
 In the case of Non-Banking Financial Institutions and entities, they are only allowed
to issue PPIs under the semi-closed or the closed system. This includes mobile-based
PPIs. The only condition to the issuance of PPIs by non-banking entities is that they
are required to maintain an escrow account with any scheduled commercial banks in
the country.