Highlights:
- PPIs or Prepaid Payment Instruments help the purchase of good and services
- There are mainly 3 types of PPIs i.e. Open System, Closed System and Semi-Closed System
- Razorpay enables businesses to accept online payments via credit/debit cards, net banking, wallets and the Unified Payments Interface from customers
The Prepaid Payment Instruments also knows as the PPIs help facilitate the purchase of goods and services which includes the financial services, remittances, funds transfers to family and friends, among several others, against the value stored in such instruments.
These are generally pre-loaded cards and, in some cases, a pre-defined purpose of payment.
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The 3 types of PPIs are:
Open System PPIs: Debit and Credit cards
Closed System PPIs: Gift Cards
Semi-Closed System PPIs: GPay and Paytm
1. Open System PPIs
Some of the most commonly used Open System PPIs are debit and credit cards. A user can make a cash withdrawal using these PPIs. However, one must note while withdrawing cash from a credit card as by doing so you will be charged a higher rate of interest.
These PPIs issued by banks (approved by RBI) can also be used at any merchant for the purchase of goods and services, including financial services, remittance facilities, etc. Cash withdrawal at ATMs/ Points of Sale (PoS) terminals/Business Correspondents (BCs) is permitted through these PPIs.
2. Closed System PPIs
In Closer System PPIs, cash withdrawal is not allowed and the purchase of goods can be done only from the issuer entity. Additionally, such PPIs also cannot be used for payment or settlement with third party services.
Issuance and operation of such instruments are not classified as a payment system and does not require approval/ authorisation from the Reserve Bank of India (RBI).
3. Semi-Closed System PPIs
Such instruments also do not allow the users to withdraw cash, irrespective of whether they are issued by banks or non-banks.
For example, HDFC Bank’s PayZapp, State Bank of India’s YONO are approved by RBI and the non-banks PPIs such as PayTm, GPay are also used for the purchase of goods and services, including financial services, payments, money transfer, remittance facilities, etc.
These can be used at merchant locations that have a contract with the issuer to accept such PPIs as payment instruments.
