BluSmart users' wallet woes: 'Closed loop' model may pose refund issues

Customers of the beleaguered electric vehicle ride-hailing platform BluSmart may have to wait for 90 days or more to get a refund from their Blu wallets even as the ‘terms of use’ outline that Blu Wallet is strictly ‘non-refundable’ and holds ‘no expiry date’.

 

The 90-day refund period and the non-refundable wallet policy have raised concerns among BluSmart users, as the company's wallet operated within a closed-loop system.

 

Closed loop prepaid payment instruments (PPIs), such as the BluSmart wallet, enable users to only purchase services from the ride-hailing entity alone. Cash withdrawals are not permitted for such wallets. 

 

Ecosystem players have suggested that regulatory intervention may be necessary if the company fails to process refunds amid indications of a complete shutdown of operations. 

 

“For closed loop wallets, companies either rely on in-house developers or authorise third party tech service providers for their customers. BluSmart, in this case, may have been operating its own wallet,” the founder of a payment aggregator said. 

 

The person added that if refunds don’t come in, customers may opt for litigation or the regulator should step in.

 

However, a regulatory intervention may not be on cards just yet, since the Reserve Bank of India (RBI) does not regulate closed-loop wallets. 

 

The issuance or operation of such wallets is not classified as a payment system requiring the banking regulator’s authorisation.

 

Hence, these wallets are not supervised by the RBI. 

 

Industry executives added that the company should expedite the refund process if it foresees complete shutdown of services. 

 

“The company may not earn any float over the escrow account that handles the wallet. Compliance does not allow any balance lying in an escrow or a nodal account to qualify for interest. They should accelerate refunds since such circumstances create security concerns,” another industry executive said. 

 

The Securities and Exchange Board of India (Sebi) flagged fund diversion by Gensol — BluSmart founders Anmol Singh Jaggi and Puneet Singh Jaggi. This led to an operational halt at BluSmart last week.  

POCKET PINCH 

• For closed loop wallets, companies either use in-house developers or third-party services
• BluSmart was operating its own wallet
• Ecosystem players suggest that regulatory intervention may be necessary if firm fails to process refunds  
• BluSmart may not earn any interest on funds in the escrow account that  handles the wallet