Bill payments – anytime anywhere

Reported by: |Updated: November 12, 2016

The Bharat Bill Payment System, which got launched in a pilot version, is a game changer for the Indian economy

India is poised to provide its citizens with the luxury of a ‘anytime anywhere’ bill payment system. A pilot of this ambitious project was launched on 31 August 2016 with the National Payments Corporation of India (NPCI) as the Bharat Bill Payment Central Unit and 26 banks and non-banking financial services entities initially constituting the Bharat Bill Payment Operating Units (BBPOUs). As the system becomes fully operational, it is envisaged that one can even pay school fees, municipal taxes and utility bills through an integrated platform. To begin with, the pilot project will cover repetitive payments for everyday utility services such as electricity, water, gas, telephone and Direct-to-Home (DTH).

In due course of time, said A.P. Hota, MD and CEO of NPCI, “Bharat Bill Payment System would link all major billers in the country with all their consumers, which will simplify bill presentment and bill payments electronically. Currently, the volume of bills being paid by cash is so large that even if 25% of the bills get paid electronically, impact would be visibly enormous.”

INTEGRATED STRUCTURE

Retail payments in India has bill payment as a significant part – it is estimated that over 3000 crore bills are raised amounting to Rs 6,00,000 crore every year and while different forms of payments are in vogue, cash and cheque payments are the preferred media. There is no interoperability in the payment system at present and electronic payments are still not a preferred mode for many and these modes are insignificant or totally absent in realms like school or university fee payments as well as in municipal taxes. It is in this scenario that the Reserve Bank of India mooted the setting up of Bharat Bill Payment System, which it wanted to be an integrated bill payment system offering interoperable and accessible bill payment service to customers through a network of agents, enabling multiple payment modes, and providing instant confirmation of payment. RBI wanted the BBPS to function as a tiered structure for operating the bill payment system with a ‘single brand image’ providing convenience of ‘anytime anywhere’ bill payment. So, it set up the Bharat Bill Payment Central Unit, which is NPCI, and Bharat Bill Payment Operating Units, which are the 26 notified entities under the pilot project. RBI has given approval to 62 entities to function as BBPOUs. BBPCU will undertake clearing and settlement activities related to transactions routed through BBPS and the BBPOUs will on-board billers, aggregators and payment gateways. They would also set up agent network and customer touch points to handle bill payments through different delivery channels including self-service, assisted, electronic and manual modes.

What is unique about BBPS is that it will have an inherent dispute resolution mechanism to handle disputes arising between system participants.

RBI had earlier set up Giro Advisory Group (GAG) to define a framework that enables the creation of pan-India touch points for bill payments in the country and its recommendations include the creation of BBPS.

FOR BILL PAYMENTS

So, what does the system envisage for the common man? In effect, a customer of MTNL in Mumbai will be able to pay the phone bill at any outlets of Oxigen, which is a BBPOU, even though the two entities do not have any direct agreement for payments.

At present, billers are connected to multiple banks through bilateral contracts, which is a laborious process. The idea is for the biller to be connected through one operating unit, which will be available to the customers of all operating units. The billers need to make available on the web details of the bill, consumer number, address and bill amount, which would be accessed by the BBPOU. The system also ensures that the bill payment is done in real time and the customer gets instant confirmation, even when he decides to pay using cash.

In an explanatory publication, NPCI says in the final form, BBPS will facilitate payments by customers of electricity bills, water/municipality bills, gas bills, telephones bills, DTH bills, school fees, college fees and subscriptions, insurance, mutual funds and credit card payments, government payments, charity donations and other one-time payments. The payment channels possible are internet, mobile, POS, MPOS, kiosk, ATM, bank branches, BCs and agents and payment modes, including cash, credit card, debit card, IMPS, internet banking, NEFT, prepaid card, wallet and UPI. Customers can also opt to pay full, minimum, excess, part and penalty.

In the online mode, a biller is connected online to the respective BBPOU, all the communications will happen real time and BBPOU will confirm the payment after getting confirmation from the respective biller.

There are two offline modes. In the first mode, the biller is not connected to the BBPOU on real time basis. The mode provides a file of expected bills on a regular basis to the respective BBPOU and BBPOU will confirm the bill payments basis the bill information dump provided by the respective biller. In the second mode, the biller does not require a bill fetch or is not connected to the BBPOU on a real time basis. It receives all the bill payment requests for that particular biller without any validation.

The BBPOUs are benefited by the provision of a single integration and reconciliation process of multiple billers, by expanding reach to customers through OFF-US business. Besides, the BBPOUs can offer value added services like online presentation of bills and ensure timely and guaranteed settlement.

Similarly, the biller is benefited by improved liquidity because of timely settlements.

The customer is benefited by time saving, uniform experience and flexibility of payment channels, instant payment confirmation and the grievance redressal mechanism.

So, as a customer, one will no longer have to visit individual billing companies’ websites or physical outlets to pay bills.

BBPOU VIEWPOINT

How do BBPOUs view the prospects of the system?

“As a BBPOU,” says M.G. Ajayan, GM-IT, Canara Bank, “our main role will be to on-board billers, aggregators (like BillDesk, CCAvenue, Paytm, PayU etc) and payment gateways and set up agent network (like BangaloreOne) and customer touch points to handle bill payments through different delivery channels, including self-service (kiosk based payments), assisted, electronic and manual mode (bill payment at branches).”

He says BBPS mainly focuses on facilitating the consumers to make payments to their billers ‘anytime anywhere’ thus ensuring interoperability of payments. The bank as a BBPOU, he adds, will be benefitted in terms of the following:

  • facilitating customers with bill payment to all types of billers at one single point either through online or offline mode
  • generating revenue through commission sharing model by the empaneled aggregators while direct billers will help in increasing the bank’s fee based income
  • using the bank’s network of branches across the country in bill payment collection and thus derive benefit through the float funds.

KEY RESPONSIBILITY

According to Naveen Surya, MD, ItzCash and chairman, Payments Council of India, one of the key responsibilities of a BBPOU is to identify and integrate billers in category of mobile, DTH and utility services. “We would we integrating them with the BBPCU. We would also be providing the option of accepting payments from all payment instruments and will not be restricted to ItzCash products; which include all debit credit cards, prepaid cards, wallets and even cash. We would provide our retail ICW (ItzCash World) network access to consumers to pay using BBPS across the country of more than 75,000 outlets using any payment option including cash.”

He mentions that post-implementation, customers would have the possibility to pay for BBPS billers on ‘anytime anywhere basis’ and using ‘any payment’ option – all digital and physical forms including of cash. Billers would get all their collections in an integrated manner from a single partner without the hassle of managing multiple collection partners and multiple reconciliations among others.

DUAL ROLE

“We will be playing dual role of biller side BBPOU (bringing billers on board BBPS) as well as customer and agent side BBPOU (delivering services to them for bill payments),” says Sunil Kulkarni, DMD, Oxigen Services India. He says in terms of infrastructure creation, Oxigen is in a unique position to offer these services to consumers of Oxigen Wallet on its mobile application, online partners of Oxigen and walk-in customers in its rural and urban agent locations equipped with Oxigen microATM, mobile app or internet enabled PCs. “These bills will be paid through cash, Oxigen wallet and Aadhaar Enabled Payments System (AEPS) for Jan Dhan account customers. This will be an important step towards a cashless economy,” says Kulkarni.

He maintains that this is a huge opportunity to move towards digital India. “While the pilot will cover limited categories of bills taken on-board, post-implementation, the system will take care of major pain points like payment of taxes, school fees, examination fees, society payments etc and the list is endless,” says he.

Kulkarni says BBPS is inspired by a popular European payments system in Europe, Latin America and parts of Asia called General Interbank Recurring Order, or GIRO, which is an automated electronic payment service which allows you to make monthly payment to the billing organization from your bank account directly. “BBPS democratizes access to all kinds of bills to customers with all payments modes. Typically, bill payment was always available for customers with credit cards/debit cards/net banking, as most billers provided the facility on their website payment gateway. However, poor payment gateway experience and fear of phishing prevented large scale acceptance of card/bank account based payments on internet. BBPS opens up all channels of payments at the convenience/preference of customers. It enables 200 million Jan Dhan account holders to make payments through RuPay debit cards or Aadhaar cards from their bank account in rural India,” he points out.

EASE OF PAYMENTS

Kumar Karpe, CEO, TechProcess Payment Services believes that the implementation of BBPS will foster ease of utility payments through a single outlet and a customer will be free from visiting individual billing companies’ websites or payment outlets. “It is an appropriate step by the RBI for the consumer’s benefit and also to enable creation of a database of all payments received which will help in building more credit products for the consumers,” says he.

TechProcess, he says has 70+ billers and the company intends to expand this to 200 billers soon.

Ajayan of Canara Bank says approximately 250 billers across various segments could become part of the system. He says BBPS will facilitate hassle free payments ensuring online security.

“Payments through electronic mode in India do not fully address the needs of the majority of the population due to lack of their accessibility across the country. In order to address this issue, the idea of establishing a pan-India touch point payment system has come in. The Reserve Bank of India has initiated the ground work for creation of BBPS as a common payment point for all utility billers after a wide consultation process involving study groups, stakeholders and the general public. Jordan has launched a similar electronic billing presentation and payment – EBPP – system to enable its people to receive and pay bills electronically from computers, cash machines and PoS terminals and to aid economic and business efficiency by cutting paper-based transactions,” says he.

Surya reveals that ItzCash works directly with over 100+ billers in mostly categories of utility and DTH. “Last year we did over 7000 crore of payments with the BBPS category merchants and this year we are planning to grow the business for these categories to 15,0000 crore. We serve more than 35 million consumers for these services and will continue to grow these numbers with the roll out of BBPS for our biller partners,” says he.

He also mentions that in a country where over 90% of bill payments by consumers are done using cash, an alternative channel can help organize the whole industry and drive the digital payments agenda. “This also helps in bringing all types of consumers within the fold of digital payment systems weather or not they own a bank account. There are similar models globally such as GIRO in Brazil and Sadad in Saudi Arabia,” says he.

ADVANTAGE CUSTOMER

Surya is of the view that a customer need not really make too much of changes at their end to get into BBPS, except that they start getting options to pay additionally via mobile Apps or websites provided by BBPOUs or physical outlets of the BBPOUs. “The customers would need to a do one-time registration and would have options to pay billers under BBPS using any of their preferred payment options – online or offline. They would get the physical or digital receipt and the appropriate confirmation on their mobile. They would continue to receive bills as they currently do from their billers. Now, basis their registrations with BBPOU, they can get additional alerts and facility of auto pay etc depending on features offered by different BBPOUs. In case of any problem, they can contact the respective BBPOU or appropriate help desk. In the case of billers, they can talk to any of the BBPOUs and integrate with BBPS (BBPCU) and take advantage of consolidating and centralizing all their collections through their preferred payment partner as ‘default BBPOU’,” he explains.

Karpe of TechProcess says BBPS can be a more dynamic mechanism if it goes beyond utility bill payments over time and it will only help in enhancing the consumer’s confidence and overall experience. “This uniform payment platform will impact every individual within and outside India as it will hugely save time and resources and transform the country and prove to be a game-changer,” he avers.

Kulkarni of Oxigen Services India elaborates on the process: “A customer needs to have details of his bill, mainly his customer ID. Based on this the system can fetch the bill with all details including bill number, amount, due date etc. After that all that he needs to do is offer his preference for payment mode.”

He says Oxigen Wallet mobile app will offer all internet payment modes such as wallet, credit card, debit card and UPI. Its agent network will initially offer payment modes such as cash wallet, followed by AEPS, UPI and debit card/credit cards.

PAYMENT GATEWAY

Ajayan says even now Canara Bank is providing payment gateway for many schools, colleges and government departments for online collection of fees / taxes. The same will be extended through BBPS since that will be a primary activity of a BBPOU, he adds.

He points out that all the banks will act as BBPOUs integrated with NPCI directly. On the other side, they will work on on-boarding the direct billers/aggregators. The integration will involve the connectivity of the banks’ payment channels (net banking, mobile banking, branch offline payments, etc) with NPCI. Customers of the bank can choose any of the payment channels and initiate the payment to the listed billers and get instant confirmation of the payment, says he.

When fully implemented, the reach of BBPS will extend to the financial inclusion efforts in the country, feels Ajayan. He mentions the huge success of the Pradhan Mantri Jan Dhan Yojana, which has ensured that almost 80% of the citizens in the country today hold bank accounts and they will be able to make use of the BBPS for making payments to their utility bills as a one-stop-shop mode.

Karpe maintains that BBPS is a simplified system and it does not require any strenuous understanding to use it. “If any consumer is unable to use the online version, he can simply walk to a local outlet and make all the payments under one roof,” says he.

“The entire BBPS network works on a gradated structure. The BBPCU, which is a central system will systematically connect all billers together while the NPCI will be responsible for setting up operational, technical and business standards for the entire system and its participants, and also undertake clearing and settlement activities. The BBPOUs will be the sole authorized establishment to facilitate the online and offline bill payments,” he explains.

COVERAGE

Kulkarni maintains that the system will cover 100% of urban India as banks, wallet players and agent networks have fair penetration. In the case of rural India, the BC network would need to expand beyond the claimed 200,000 villages as India has 650,000 villages.

Surya of ItzCash looks at it from another perspective: “The values involved in BBPS could be very large. Every BBPOU needs to earn at least Rs35-40 crore gross revenue to have a sustainable business model, which means at least Rs15-20crore bill for about 15-20 million consumers considering every consumer is paying at least 10 bills in a year. This is going to be very huge considering the number of BBPOUs,” says he.

STANDARDIZING FEE

Kulkarni stresses on the crucial need for standardizing the fee payable to BBPOUs. “Most of the utilities are monopolies and go for a tender, which brings distortion in commercial framework. Ideally it should follow Merchant Discount Rate (MDR) for card transactions. BBPS deployment should not become reason for utilities to reduce cost of payments and make it unviable. The benefit of BBPS is the large access as a result of the standardization of the interface. Utility MDR for cards is already one of the lowest in the world,” says he.

Surya says this issue is under active discussion at NPCI. A steering committee consisting of representatives of all key stakeholders would decide the same.

Ajayan mentions that if reduction in MDRs had happened during the introduction of RuPay cards and IMPS facility, it is possible that introduction of BBPS may result in further rationalization of fees/charges.

SETTLEMENT SYSTEM

What is the settlement system that is central to BBPS?

Says Surya: “All ‘on-us’(ie where billers and consumes are both acquired by the BBPOU) transactions are to be settled by BBPOUs directly. However, where either of the biller or consumers is acquired or serviced by another BBPOU known as ‘off-us’ transactions, it would be settled via BBPCU, that is NPCI. Such settlement for non-banks would be through a ‘sponsor bank’ partner. This is a well-established process very similar to IMPS and would be used to ensure smooth and risk free settlement for all parties involved.”

Kulkarni is also of the view that like Immediate Payments Service (IMPS), both customer side BBPOU as well as biller side BBPOUs are part of settlement process through NPCI. “Currently one settlement per day is being executed for the pilot. It is expected that there will be more than one settlement per day in future, although from billers’ perspective even one settlement per day is good enough for them,” says he.

Ajayan feels that since all the transaction will be routed through the NPCI, a unified settlement process will be adopted wherein NPCI will share files among all the banks and get them reconciled with the banker account maintained by the respective banks. The banks shall in turn make final settlements to the billers, aggregators and agents.

Karpe is of the view that since BBPS enables interoperability for bill payments to the end customer, settlements between BOUs and COUs need to be enabled. “NPCI shall be acting as the central settlement agency to enable this. The standards for settlement operations are similar to any other mode where the participants get the settlement reports and funds are received and parted as per the agreed time cut offs,” he adds.

mohan@bankingfrontiers.com