 

Open System PPIs (cards)

The Indian prepaid card market has witnessed tremendous growth in recent times due to rapid urbanization.
With the higher rate of internet and smartphone penetration, India has witnessed tremendous growth in the e-
commerce segment. From online shopping to buying groceries and essentials, e-commerce vertical constitutes
the major use of online prepaid cards. The surge in the prepaid card market is expected to increase significantly
in the coming years, as more and more people adapt to the mechanism.

In an attempt to integrate the market, businesses are expanding their operations to e-commerce verticals.
Consumers have a variety of options in terms of the platform they choose to utilize, which could boost online
payments through prepaid cards. The use of open loop cards in diversified domains is an attractive feature,
whether in supermarkets or as gift cards. Enhanced by the number of private businesses offering meal cards as
part of their employee benefits, the adoption of open loop prepaid cards is expected to be at an all-time high.

The open loop prepaid cards market could integrate various industries ranging from healthcare and campus
cards to payroll and gift cards. As the concept of prepaid cards has become popular in recent times, the market
has entered the maturity phase, with extensive opportunity for growth. To ensure the growth of the market,

major regions to integrate would be Tier 2 and Tier 3 cities; the working-age population should also be
encouraged to use the cards for convenience.

The growth of the market will work in correlation with India’s payment security market, due to the RBI

guidelines, which state that all cards issued must be PCI-DSS compliant, an international collaboration for
payment security.

Number of open loop prepaid cards issued in India’s payment services market based on volume
during the financial years 2016 to 2021 (@ in millions)

  
 
 
 

1500 143.5% 200%
1,088.8 940.5 150% =
1000 100% $
500 143.5 a €
13.6% 0%
0 = = 50% §
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 e

mmm Number of Cards Issued in Mn =ftGrowth Rate

Source: India Payment Services Market Outlook to 2026, Ken Research, August 2021.

Semi-Closed System PPIs

These are PPIs issued by banks (approved by RBI) and non-banks (authorized by RBI) for the purchase of
goods and services, including financial services and remittance facilities for use at a group of clearly identified
merchant locations or establishments which have a specific contract with the issuer (or a contract through a
Payment aggregator or payment gateway) to accept the PPIs as payment instruments. These instruments do not
permit cash withdrawal, irrespective of whether they are issued by banks or non-banks. Most wallet-based
Payment systems, such as Paytm Wallet, are semi-closed system PPIs.

Closed System PPIs —- CUG Cards:

Working model of closed user group (“CUG”) cards in India’s payment services market

 

Particulars Description

Deposit or withdrawal by right beneficiary

Ease of maintenance

Alternate channel to sell product offerings

Allows the card issuer to control the entire value chain of CUG ecosystem in India

Provides flexibility to the card-issuing company in terms of setting pricing and fee
structure. Additionally, an issuer does not have to rely on any retail merchant or financial

 

Benefits

 

 

 

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