Amazon just cleared its biggest hurdle for payments in India

Amazon can now operate its digital payments service in India after receiving a Prepaid Payment Instrument (PPI) license from the country's federal bank.

This marks the entry of Amazon in a highly competitive — and rapidly growing — mobile wallet landscape in India which is currently dominated by Paytm with 200 million users.

Incidentally, Paytm is backed by Alibaba, Amazon's biggest rival in Southeast Asia.

There's also PhonePe, an e-wallet launched by Flipkart (Amazon's biggest rival in India) last September. PhonePe reportedly accounts for 5 percent of Flipkart's transactions now, after receiving a push from India's cash ban last November.

And there's Samsung Pay too. But that's available on select Samsung Galaxy devices only.

The PPI licence issued in the name of Amazon Online Distribution Services will allow Amazon's e-wallet to be used for both online and offline transactions.

It is one step up from 'Pay With Amazon', that had launched in India in 2014, which could be used for transactions on Amazon only. Users were offered cash backs and additional discounts if they used Pay Balance to complete their purchases.

Until now, it operated on the PPI licence issued to reward points management and gift card provider Qwikcilver, in which Amazon had invested $10 million in 2014.

With the new licence, the Seattle-based firm can widen its horizon for payments, and include more point-of-sale transactions. Only then will it pose any threat to Paytm which is ruling offline use cases for now.

"We are pleased to receive our PPI licence from the RBI," said Sriram Jagannathan, vice-president of payments at Amazon India, in a statement. "Our focus is providing customers a convenient and trusted cashless payments experience. RBI is in the process of finalizing the guidelines for PPIs."