RBI Policy Development: New scope for UPI and BBPS

Dec 7, 2022:

The Reserve Bank of India has announced two developments when it comes to the Unified Payment Interface(UPI) and Bharat Bill Payment System(BBPS)

What is UPI?

You have to make an immediate transfer to your friend. You get your phone, open the mobile app, enter the Virtual Payment Address (unique ID as given by the bank), enter the amount to be transferred and there you go!

This is a UPI transaction. 

UPI is a real-time payment system that enables you to transfer funds from one bank account to another via a mobile platform.

Easy, faster and seamless transaction from anywhere round the clock 24*7 and 365 days!

Yes, it’s a reality now with UPI transactions.

UPI supercharges multiple bank accounts and all of them in a single mobile application. This system also enables you to send a request to receive money which can be then transferred by the payer as per convenience.

You go to your favourite pani-puri stall, scan the QR code and transact in seconds. That’s the power of UPI.

Today, UPI has been the major contributor towards revolutionizing digital payments in India.

What is BBPS?

BBPS was introduced by the Reserve bank of India. This was designed to offer an integrated, interoperable bill payment system for customers. BBPS facilitates the conversion of bill payments from cash to an electronic channel.

This system enables payment via multiple payment modes and also ensures instant payment confirmation.

Here is a simple structure that will help simplify the bill payment process via BBPS:

Payment Modes

Two-tiered structure of BBPS

BBPCU:

 The operations of BBPS is looked after by a single authorized entity known as Bharat Bill Payment Central Unit (BBPCU).

BBPOUs:

Bharat Bill Payment Operating Units (BBPOUs)-the authorised operational units are of the following types:

Why BBPS?

Know how BBPS can be beneficial for you.

• Interoperable: Both banking and non-banking platforms will be connected via an integrated platform like BBPS.
• Accessible: Faster and seamless payment of bills is a reality now through any channel including Agent-Assisted Model at any Agent/BC outlet/bank branch/ online channels.  
• Integration: BBPOU (Bharat Bill Payment Operating Unit) i.e Banks/Non-Banks will have to connect only to BBPCU (Bharat Bill Payment Central Unit) for access to all the billers. BBPOU is where all billers need to connect to enable all customers to pay their bills.  
• Clearing & Settlement: A standard TAT is maintained for multiple clearing and guaranteed settlements. 
• Complaint Management:  Customer complaints about any transactions will be tackled by a standardized complaint management system.

So, what is RBI planning?

1. UPI will have the option of blocking funds for future payments:

UPI is now powered with a single block and multiple debit feature. But what does it mean?

Now customers can create a payment mandate against their merchants for specific transactions at a later date by blocking funds in the merchant’s bank account.

The new single block multiple debit feature will allow you to block funds for future payments which can be debited as per your needs. 

For example, There’s an e-commerce platform and a sum of Rs 10,000 can be directly approved by a customer. Now they place 10 different orders of Rs 1,000 each. This will now be auto-debited until the maximum limit of Rs 10,000 is reached. Hence they do not need any additional permits.

What it means for businesses?

• The merchants will get the assurance of timely payments, while the customers can pay by blocking the amount in their accounts. This means that the commitment to pay is held intact but once the goods are delivered and received only then the amount will be transferred to the account.
• Once the UPI customer has agreed to block the money in their bank account, the merchant can now go for multiple debits up to a maximum permitted amount.
• This feature will enable easy methods for the customers to keep the money for investment purposes such as buying securities in the stock market, besides the purchase of government securities and others.
•  This UPI development will also build better trust in transactions as merchants will be assured of timely payments.

Although UPI already has the feature of processing mandates for recurring transactions it only allows a single block and single debit at a time.

“It has, therefore, been decided to introduce a single-block-and-multiple debits functionality in UPI, which will significantly enhance the ease of making payments in e-commerce space and towards investments in securities,” said the RBI.

2. Bharat Bill Payment System (BBPS) Will Now Support All Payments & Collection:

Currently, BBPS does not support any non-recurring payments or collections. It does not cater to bill payments and collections like rent collections, education fees, and tax payments even when they are recurring in nature.

RBI has now decided to improve the scope of BBPS by including all categories of payments and collections, both of recurring and non-recurring nature.

What it means for businesses?

• This will allow a wider set of businesses for faster access to funds and improved efficiency of BBPS.
• Enabling Recurring payments across wider categories will allow the customers to ensure timely payment of their bills and that too it is all automated. 
• Hence this means there would be no customer intervention at every step of bill payment.
• Instead of just recurring payments, now business-to-business and peer-to-peer invoice payments can be done seamlessly through BBPS, hence invoices can be counted as bills

“India, as an economy, has already witnessed a rapid rise in digital payments, logging 23.06 billion transactions amounting to Rs 38.3 lakh crore in the third quarter this year. RBI’s recent efforts with respect to digital payments will certainly contribute towards the cashless economy imperative.”-Akash Sinha, CEO and co-founder, Cashfree Payments

Banking has faced prominent evolution. The evolution of the fintech space has had a significant impact on businesses today.

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