The curious case of PayUMoney’s wallet in India


payumoneyPayments company PayU India, which had started offering cashbacks to its wallet, appears to have removed it. In February, the company was offering 10% cashback for every transaction (up to a limit of Rs 50), but now it is merely offering discounts. At the time, to quote its own press release, “Available on 8500 websites, PayUMoney becomes the most widely available Wallet service in the Indian e-commerce Industry”.

We noticed that PayU wasn’t mentioned in the Reserve Bank of India‘s recent update on semi-closed prepaid wallets, which mentions all the prepaid wallet services that were given a license till May 31, 2014. However, PayU’s website makes a mention of a wallet on its pricing page, but the wallet is no longer being promoted on its homepage. Instead of cashbacks, the company now offers customers discounts, when shopping on merchant sites.

pau_cashback

PayU is not a merchant and doesn’t have its own goods, so a closed wallet cannot be used for making third party purchases. It is worth noting that closed wallets do not require a license (explained below). If it was offering third-party purchases, then it needs a semi-closed prepaid wallet license.

So did PayU even have a wallet when it began offering cashbacks? If not, how was it PayU offering cashbacks?

Nitin Gupta, CEO at PayU, did not directly address these questions. In an emailed response, he asked us to try using the product, and “We call it cash back but we are giving upfront cash discount.”

However, this does not explain whether PayU was offering cashbacks to a wallet earlier. The company had announced a partnership with tablet manufacturer Datawind, and the terms and conditions still up on Datawind’s website indicate that what was on offer were cashbacks to a wallet, and PayUMoney’s own press release details how it works:

“How Consumer Get Instant Cashback On Every Online Purchase?

A consumer just needs to select PayUMoney as a payment option on an ecommerce website and thereafter continue paying through usual payment methods like Credit Card, Debit Card and Netbanking account. The consumer gets a guaranteed cashback instantly in his PayUMoney account (wallet). In the very next purchase, the consumer can use this accrued cashback money as a discount. Moreover the consumer again receives a cashback on the amount after discount! This way a consumer gets literally paid, every time he/she pays through PayUMoney. The icing on the cake is the fact that PayUMoney’s cashback offer is a top up on any discount or cahsback being offered by a merchant or bank.”

Kulin Shah, co-founder at Wishberg, who had tweeted about PayUMoney’s cashback on redBus, also confirmed to us that he had received a cashback to his PayUMoney wallet upon purchasing a ticket from Redbus earlier this year.

Gupta told MediaNama that PayUMoney is not in violation of any regulation, but he has not responded to a query about whether they were in violation of regulations when the cashback was being offered earlier.

However, the company might have received a wallet license since. In the email, Gupta mentions “Further, we are planning an announcement in mid July which should answer your questions.”

Update: Deepak Abbot, AVP at Paytm, (a PayU competitor) that has a semi-closed prepaid wallet license, just tweeted a screenshot of his PayUMoney account, which appears to suggest that a cashback was given to him:

 

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Types of Pre-paid Wallet Instruments

1. Closed System Payment Instruments, which are not reloadable with cash and do not permit cash withdrawal (for example: phone calling, prepaid voucher and gift vouchers)
2. Semi-Closed System Payment Instruments, used at merchant locations, and which can be reloaded, but do not allow cash withdrawal (for example: cash cards and smart cards)
3. Semi-Open System Payment Instruments: these can be reloadable or non-reloadable, and can be used at any point-of-sale terminal, but they do not allow cash withdrawal. For example: gift cards issued by banks
4. Open System Payment Instruments: these can be re-loadable or non-reloadable, but most importantly, they permit cash withdrawal at ATMs. Examples of such cards are the Payroll cards and travel cards.