BBPS set to unleash major changes across payments ecosystem
RBI has allowed five categories of billers in the BBPS ecosystem: water, direct-to-home, postpaid phones, gas and electricity
Digitally-savvy urban consumers have the easiest of payment experiences, but only a small percentage of bill payments happen digitally. In rural areas, bill payment remains a tedious chore.
Imagine a villager having to wait for a bus, and travelling for two hours to the nearest taluka office to pay an electricity bill of ₹50. The Bharat Bill Payment System (BBPS) has been designed as a system that can address such issues. It functions as a central switch. Once a biller connects into BBPS, s/he can accept bill payments from any BBPS customer touch point. Thus, a bill payer from Shillong will be able to pay his utility bills, even if he is on tour in Maharashtra, by visiting a nearby BBPS centre and paying a nominal service fee.
After the success of the Unified Payments Interface, BBPS is the next big initiative from the National Payments Corporation of India)—an umbrella organization for payments in India, owned by Indian banks and regulated by the Reserve Bank of India (RBI). With new payment banks, and many other organizations planning to join the BBPS network, the nearest bill payment centre may soon be your kirana store, your mobile recharge shop, or even your post office.
BBPS will unleash major changes across the ecosystem. For customers, the increased number of payment touch points, and the ability to pay a wide range of bills using any mode of payment, including cash, will usher in a new age of convenience. For billers, BBPS can bring down the cost of collections significantly. Even the largest of billers such as the electricity, water and gas utilities have a limited number of physical collection centres within their own geographies. It is estimated that the cost of bill collection at a physical point would be ₹100 per bill, while it would be lower if collected through a partner network. With BBPS, billers need not tie up individually with third parties for collection. Once they join the network, every collection unit affiliated to BBPS becomes their collection unit.
The universe of billers will also expand due to BBPS. Conceptually, anyone who has a bill that needs to be collected—including microfinance institutions, housing societies, schools and colleges, newspaper vendors, the milkman, and others—can become billers in the BBPS system. These are the segments where bill collection is the most inefficient. My newspaper vendor, for example, sends me his bill once every three months and that, too, after a couple of reminders. I have to chase my housing society to send me my quarterly maintenance bill since I do not live in the same property. By joining the BBPS network (as and when RBI opens up BBPS to these categories), such billers can ensure timely collections, while providing a convenient payment mode to customers like me.
For many billers, BBPS can help move bill collection from an expensive, high-touch process involving multiple follow-ups, into to a cost-effective, low-touch process. For banks and fintech firms, BBPS can help with greater customer engagement. For bank customers, the ability to pay a wide range of bills through the bank account is a strong incentive to ensure that their bank account is always funded and active. For mobile wallets and payments apps, bill payment is one of the best ways of ensuring regular usage by customers and making them familiar with their apps.
For organizations like banks that bring billers into BBPS, this is an opportunity to build a deep relationship. By providing a good BBPS biller service, such organizations can build revenues through transaction fees, providing current accounts and offering loans against future cash flows. For technology and service providers in the billing ecosystem, BBPS could expand the business opportunity as more billers and consumers enter this network.
Currently, RBI has allowed five categories of billers in the BBPS ecosystem: electricity, water, direct-to-home, gas and telecom (post-paid). Hopefully, more categories will be opened up soon.
Venkatesh Hariharan is fellow and director (fintech) at iSpirt, a non-profit think tank that aims to make India a product nation.
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