India’s central bank is currently examining various digital wallets linked to electric-vehicle companies following the sudden shutdown of the country's largest all-EV taxi service, leaving users stranded without access to their funds, according to sources familiar with the situation.
The scrutiny of payment platforms utilized in India's emerging EV sector comes in the wake of the issues faced by customers of the app-based ride-hailing service BluSmart, whose digital wallet faced challenges due to fraud allegations against the company. This incident shed light on the lack of protection for users who store money in closed-loop wallets for transactions on apps, including EV-related services such as ride bookings and charging station usage.
The Reserve Bank of India (RBI) has initiated informal discussions with EV charging infrastructure operators and other app-based EV providers to evaluate potential risks to consumers, sources requested anonymity as the matter remains confidential.
Closed-loop wallets, unique payment systems confined to a single platform, have become increasingly popular in India's rapidly expanding digital landscape. Unlike open-system wallets regulated by the RBI, closed-loop wallets are not directly supervised by the central bank, making them susceptible to risks in the event of platform failure.
Following the incapacity of thousands of users who had deposited funds into BluSmart's wallet for rides and were unable to withdraw or transfer the money, the company informed customers in April that refunds could take up to 90 days.
The RBI has not yet replied to a request for comment via email.
Additionally, the central bank is reportedly considering a meeting with the involved parties in the upcoming weeks, according to sources familiar with the plans.
Possible measures under consideration include mandating escrow arrangements for consumer balances, akin to those obligatory for payment aggregators, to safeguard funds in case of a business closure. Another suggestion is to extend certain aspects of RBI's Prepaid Payment Instruments (PPI) guidelines to sizeable closed wallets, sources disclosed.
While the regulator has not yet finalized its position, any potential steps to enhance oversight of app-specific wallets could have far-reaching consequences for India's digital economy, where platforms heavily rely on prepaid balances to enhance customer loyalty and drive recurrent usage.
