The Concept of Semi Closed Wallets

Semi-closed systems came into being as the middle ground between the closed and open digital wallets. These are payment tools which are usable at a group of clearly identified dealers/locations which enter into contracts with specified issuers to accept the payment tool. These tools plainly do not allow cash withdrawals and retrieval. These are payment tools which can be used for purchase of goods and services at any accepting point of sale locations, but not all surely.

This is the topmost available form of digital wallet in the country. All wallet companies have an owned wallet on their website for public access and they all offer semi closed loop wallets for convenience and faster processing. These wallets allow users to:

• Make money additions into the wallet.
• Extract money as and when required into/from a bank account.
• Trade i.e. buy or sell on the website of the merchant easily with the use of the semi loop wallet.

The companies offering the semi Closed loop wallets must have the RBI license to have wallets open to public which is called a PPI license. The terms keeping changing for the RBIs license as per new developments.

Downside of the semi loop wallets:

No withdrawals- No ATMs can be used to withdraw cash.

KYC Applicable to An Extent- KYC limits is applicable above Rs.10, 000. This gets revised subject to RBI directives.

The only issue with semi-closed wallets is that they do not allow alien contractors on-boarded which can be used for buying of goods & services, comprising financial services, remittance facilities, etc. at a group of clearly identified locations with a fully established contract to allow PPI tools for payment. An example would be cash cards, smart cards and many private label cards etc.

Some Quick Pointers to Remember:

• Semi-closed wallets are digitally prepaid, and can only be used with authorized wallet issuing company.
• The keeper of the e-wallet is not allowed to redeem or withdraw cash from the wallet and only use it make online payments. 
• No interest is earned on the money kept in this account.
• All entities are allowed to issue only closed or semi-closed e-wallets to customers other than banks and non-banking financial companies.
• Every customer must fulfil KYC requirements in tune with the value of the transaction. All transactions over Rs 10,000 need to meet the subjected KYC requirements.  
• In a semi-closed wallet, online shopping and trading is possible using the same wallet network. In India, semi-closed wallets are the most possible and popular for online shopping and give-take relationships & transactions. Not just that, these wallets have high security levels too for better customer experience with easy refunds.

Semi closed wallets can be used for quick transmission of funds at selected points of sale terminals.