Prepaid e-wallets may help Uber meet RBI guidelines

MUMBAI: Prepaid e-wallets could help businesses like Uber continue to provide a seamless service and comply with Reserve Bank of India's requirement for two-factor authentication and completing transactions locally.

E-commerce sites with small-ticket transactions are looking at prepaid e-wallets for faster deals.

RBI on Friday said that payments for local services would have to be routed through domestic payment gateways.

This effectively stops multinational e-commerce companies from providing local services by debiting charges from the customer's credit card accounts on the basis of card details stored on their servers. Such auto-debit is not allowed in Indian payment gateways as RBI insists that every payment be authenticated by a password.
"With the prepaid model, payments can take place seamlessly. For instance, in Hong Kong you have the Octopus mass travel card which can be tapped for payments in grocery stores. What we have developed is a prepaid solution for internet and mobile where you don't require a card," said Amrish Rau, MD, Citrus Payments.

According to Rau, e-wallets can help meet RBI's requirement and provide for consumer convenience. "Today, the Citrus wallet is already implemented in the Meru Cabs app, which requires to be authenticated with a PIN. We are developing a prepaid version of the wallet which enables faster checkout," he added.

Unlike regulators in the West, RBI insists on a two-factor authentication for card-not-present transactions. When this requirement was introduced some years ago, card-issuing banks were worried that customers might be discouraged because of the multiple steps. But contrary to expectations, transactions have surged as customer confidence increased.

"The introduction of one-time passwords in card payments has reduced frauds. But taxi transactions are typically small value and do not run into thousands. For small-value transactions, the convenience would vastly improve if a quicker checkout was made possible," said Rau.

RBI's diktat that a local service's payment must have 2-factor authentication and be routed through domestic gateways effectively stops MNC e-tailers from providing local services.