India is going through a revolution in the digital payments segment. In the recent past, several electronic wallet service providers such as Paytm, Oxigen and PayU have entered the digital payments space and have been operating successfully. Besides private players, the government too is innovating to provide such facilities to citizens. For instance, the centre has launched the Bharat Interface for Money (BHIM) mobile application to enable cashless payments. It has also deployed the unified payments interface (UPI) system, which allows integration of multiple bank accounts into a single mobile application. The concept of payments banks is also being adopted, with three payments banks already operational in the country.
While the country has been taking strides in this space of late, a lot of ground still needs to be covered. The Reserve Bank of India (RBI) has reported that over 70 per cent of the bill payment transactions are carried out in the form of cash or cheque transactions. In addition, in cases where billers (service providers, utilities and private companies) provide digital payment facilities to customers, the payment channels and methods tend to vary from one biller to another. The lack of a uniform digital payment system causes inconvenience to customers willing to make digital payments. Thus, there is a need to provide an integrated portal for customers, offering interoperable and accessible bill payment services. Multiple payment modes and instant confirmation of payments are also needed to improve customer satisfaction. In a bid to meet this end and give a push to digital payment transactions, the central government launched the Bharat Bill Payment System (BBPS) in August 2016.
BBPS offers integrated bill payment services to customers that can be accessed at all times and from all geographical locations. Using BBPS, consumers can pay their bills through several payment channels such as internet and mobile channels, point-of-sale machines, ATMs, kiosks, bank branches, agents and business correspondents.
The system is being implemented in a phased manner. In its current phase, the BBPS allows the payment of utility bills for services such as provision of electricity, water, sanitation, gas, telephone connections and direct-to-home television. Subject to RBI approvals, the government plans to incorporate the payment of institutional fees (school and college fees, subscription fees, etc.), insurance, mutual funds and credit card bills through BBPS in the future. Going forward, the system can be built on to facilitate payments to governments and charities.
The BBPS allows customers to make payments through multiple modes such as debit/credit cards, internet banking, e-wallets, immediate payment services, UPI and national electronic fund transfers. It also provides instant confirmation of payments via SMS or paper receipts. Different payment options have been extended to consumers. For instance, bills can be paid in full, excess and minimum limits. Consumers can also pay partial bills and penalties or make multiple payments through BBPS.
Key system participants
The BBPS is essentially a two-tiered structure. It comprises a Bharat Bill Payment Central Unit (BBPCU), which is the only authorised entity operating the system. The central government has mandated the National Payments Corporation of India (NPCI) to work in the capacity of the BBPCU. The NPCI undertakes clearing and settlement of transactions routed through the BBPS. In addition, it is responsible for setting business standards, rules and procedures for technical and business requirements of all system participants.
The BBPS also includes several authorised Bharat Bill Payment Operating Units (BBPOUs). A number of commercial banking institutions and non-banking entities are authorised by the government to operate as BBPOUs. These operating units provide interoperable bill payment services to customers. BBPOUs do not need to collaborate with particular billers to provide these services.
Through the BBPS, customers and agents/agent institutions are able to contact their BBPOUs for payment of dues to billers. Moreover, the system supports both online and offline payment requests. The BBPOUs pass on the payment requests to the BBPCU. The central unit or the NPCI in turn requests BBPOUs affiliated to the biller organisations to clear the outstanding dues. A similar process flows in reverse, from the billers to the customers, for issuing payment confirmations and bill receipts.
Therefore, from a payment system perspective, the BBPCU does not own any transaction financially. It only acts as a medium to connect multiple billers and customers/agents through various operating units in the system.
Other key features
Besides bill payment and clearing facilities, the BBPS incorporates a complaint management system (CMS). The CMS is a centralised end-to-end complaint redressal portal, which enables consumers to not only raise transaction-related complaints, but also flag issues regarding the services offered by the BBPS. These complaints can be registered either at the centralised BBPS website or at any BBPOU portal and agent outlet/branch.
In addition, a dispute management system (DMS) has been set up under the BBPS. Through this, BBPOUs can raise and resolve issues related to transactions previously cleared by the central unit or other BBPOUs. To address these disputes, the BBPCU has constituted an arbitration committee that has the final say in the arbitration process. The various levels of the DMS comprise dispute initiations regarding credit adjustments and refunds, pre-arbitration, arbitration and good faith. Further, issues that have not been satisfactorily resolved by the CMS can be manually uploaded to the DMS.
Other features of the BBPS include velocity monitoring and net debit cap facilities, a settlement guarantee fund mechanism, fraud and risk management, refund mechanism, bulk upload and reporting features, and master data management.
The BBPS has the potential to provide several benefits to billers, customers and operating units. Billers benefit from faster settlement of dues, which, in turn, leads to improved liquidity positions. Further, the adoption of the BBPS removes the need for billers to develop separate digital payment infrastructure. In addition, the system has low capital and operating expenditure requirements. This facilitates small service providers or those confined to geographically small regions to expand their coverage and reach.
At the same time, customers benefit immensely from the unified bill payment system as it increases convenience and saves time. One of the key benefits for customers is that the BBPS supports both online and offline payments. It also gives them flexibility between payment channels, and the benefit of transparent pricing, instant payment confirmations and a unified grievance handling mechanism.
The operating units are also poised to benefit from the BBPS as it provides them with integrated access to multiple billers. The standard user interface, timely and guaranteed settlements, and DMS increase operational efficiencies for operating units. Further, these units are able to expand their reach and offer additional value services to their customers.
While the BBPS presents varied benefits to all the stakeholders involved in the system, it comes with its own set of challenges. India is still a highly cash-dependent economy. To encourage the movement from cash to digital transactions, the government needs to take measures to improve digital literacy. Further, for the BBPS to be successful, the government will have to enhance financial inclusion in the country. Hence, initiatives such as the Pradhan Mantri Jan Dhan Yojana and Digital India, and the launch of mobile applications such as BHIM and Aadhaar Payment are steps in the right direction. At the same time, corresponding digital and financial infrastructure will have to be developed by the government to make the BBPS a truly national phenomenon.
Another key challenge in the implementation of the BBPS is the threat of data breaches. By way of construction, the system accumulates sensitive financial data of its users. Therefore, first-time users or new adopters of digital technologies may be hesitant to use the BBPS owing to data security concerns. However, even long-time users of the technology can develop such apprehensions. Instances such as the recent banking data leak, which compromised about 3.2 million debit cards in the country, increase users’ concerns about financial data breaches. Therefore, ensuring data security will play a key role in the success of the BBPS.
The way forward
With the launch of the BBPS, the government has embarked upon a path-breaking route to enhance digital payment transactions in the country. The unique feature of being an integrated system for the payment of bills through various payment channels and modes is that it enables the BBPS to serve a large number of customers at the same time. In addition, the bill payment database compiled by the BBPS can be used in the future for assessing creditworthiness and computing CIBIL scores. That said, to secure the full benefits of the BBPS, the government needs to address issues pertaining to data security, limited digital reach and financial inclusion.