Since the February directive by the RBI, only a few banks have gone live on the BBPS interface and some of the banks with the highest number of credit card users are yet to adopt the new system. This has led to concerns that card users who clear their bills through fintech platforms may face.
Four months after the RBI directed that credit card bill payments should be processed on the Bharat Bill Payment Service (BBPS) interface, only a few banks have gone live on it. Kunal Pande looks at the reasons behind their reluctance and how this will impact fintechs and end-customers.
What was the RBI directive & what did it aim to achieve?
THE RESERVE BANK of India (RBI) had mandated that credit card bill payments shall be done through the Bharat Bill Payment Service (BBPS) from July 1, 2024. Further to this directive, other means for paying credit card bills that are currently being used by third parties like fintechs shall be no more available for paying such bills. Having said that, a cardholder shall continue to use internet banking facilities such as NEFT or IMPS for paying credit card bills.
The move enhances security over card bill payment, and also provides the regulator a better oversight on credit card exposure. Also, it shall, in the longer- term, lower integration costs for issuers as they need only one integration with a robust interoperable mode, i.e., the BBPS.
However, since the February directive by the RBI, only a few banks have gone live on the BBPS interface and some of the banks with the highest number of credit card users are yet to adopt the new system. This has led to concerns that card users who clear their bills through fintech platforms may face difficulties.
Why are banks taking so much time to join the BBPS?
BANKS HAVE BUILT a strong ecosystem of third-party integrations, which they are using to provide a number of services to their customers and also leveraging transaction data to build robust understanding of customer persona. Banks could perhaps be taking more time to join the BBPS network as it would be an additional investment without a significant value-add.
Again, joining this interface may present a risk as a bank’s customers can migrate to the BBPS that is open and allows other banks as well as payment service providers (such as fintechs) to service customers for not only card payments but also offer other payment solutions.
How does the BBPS interface work?
THE BBPS IS an integrated bill payment system consisting of NPCI Bharat Bill Pay Limited (NBBL) as the system operator (i.e., PSO) for the BBPS and Bharat Bill Payment Operating Units (BBPOU) who are system participants that onboard billers like credit card issuers or telcos as well as provide the interface (both online and physical) to the customers for payment of bills.
The BBPS allows bill payment through multiple channels like mobile apps, mobile banking, physical agents, etc., using various payment modes like UPI, wallets, cash, internet banking, Aadhaar-based payments, credit cards, debit cards and prepaid cards, etc. The live categories that are part of the BBPS are electricity, telecom, DTH, piped gas, loan repayments, FASTag recharge, cable, education fees, and others. The flexibility of payments through multiple channels including physical agents and payments through cash and by digital means ensures it reaches every nook and corner of the country. The payment options also increase significantly at one-go by integrating to the BBPS network without having to enter into separate agreements with multiple entities.
It is a robust system with prescribed payment timelines, customer servicing and grievance handling mechanism as well as secure funds settlement.
Will the delay impact end-customers?
IN THE ABSENCE of BBPS integration by banks, fintechs which are BBPS members will not be able to provide card payment facility to their customers, causing inconvenience to them. However, while they won’t be able to use third-party apps to clear their bills, end-customers can always pay their credit card bills through the websites of their banks using payment methods such as NEFT, RTGS, IMPS or via standing instructions.
According to media reports, fintechs have represented to the regulator for extension. However, currently there is no news on any such extension. In such a situation, it could be difficult for fintechs whose business models revolve around credit card payments.
FAQ’s:
What is the RBI directive regarding credit card bill payments?
The Reserve Bank of India (RBI) mandated that from July 1, 2024, all credit card bill payments should be processed through the Bharat Bill Payment Service (BBPS) interface. Third-party payment methods currently used by fintechs will no longer be available for credit card bill payments.
What is BBPS?
BBPS is an integrated bill payment system allowing payments through multiple channels like mobile apps and physical agents using various modes like UPI, cash, and cards.
Why have few banks adopted BBPS?
Banks may be slow to adopt due to required investments, existing third-party integrations, and potential customer migration risks.
What payments does BBPS support?
BBPS supports payments for electricity, telecom, DTH, piped gas, loan repayments, FASTag recharge, cable, education fees, and more.
Can customers still pay their credit card bills through internet banking?
Yes, customers can continue to use internet banking facilities such as NEFT, RTGS, IMPS, or set up standing instructions on their bank’s website to pay their credit card bills.
What is the RBI directive?
From July 1, 2024, credit card bill payments must be processed through the Bharat Bill Payment Service (BBPS).
