For one, it is not surprising the banks are disinterested in BHIM because they have their own payment apps—riding on the UPI—to promote.
The Prime Minister has reportedly asked all ministries and departments to try and push transaction volumes of the BHIM, or Bharat Interface for Money, an app that rides on the UPI (Unified Payments Interface) platform. There is apparently some concern that the share of BHIM transactions, within the UPI, has fallen sharply to less than 6.5% whereas, about a year ago, it was about 40-45%.
Encouraging digital transactions is all very well, but the strategy needs to be thought through.
For one, it is not surprising the banks are disinterested in BHIM because they have their own payment apps—riding on the UPI—to promote. It would be unreasonable to ask them to invest in another app at the cost of their own. If the government wants banks to push BHIM, it must incentivise them handsomely so that they find it rewarding enough. If, over the past year, PayTm, Google Tez and Phone Pe have all gained market share, it is partly thanks to the cash backs and freebies they have given users.
Moreover, a wallet like Paytm also has several other use cases that appeal to customers. While the government also launched incentives on BHIM, and these have resulted in a jump in the number of transactions between April and May—from 12.6 million to 14.2 million—perhaps much more is needed. But, even before that, if the objective is merely to increase digitisation, it should not matter which app is more popular as long as it is a secure one. Indeed, with WhatsApp moving into payments and partnered by three large lenders, the messaging service could gain market share quickly given it already has a user base of 20 million.
While P2P (peer to peer) transactions seem to be catching on, the government needs to get vendors to use Bharat QR—which can be read by any UPI app. Until vendors embrace digitisation for small ticket payments, it will not spread. Banks would not be averse to their customers using the QR code for purchases since they would be using their respective bank apps to do so. It is true that some banks have invested in PoS machines and want customers to use credit or debit cards.
However, at many locations, PoS machines are also a loss-making proposition for banks. To that extent, the scope to promote Bharat QR is high because there are thousands of vendors where PoS machines have not been installed.
Indeed, simply rolling out RuPay cards in the name of financial inclusion does not make sense. In the smaller towns, an Aadhaar-enabled payment system would be far safer for users since they are using their fingerprints to transact and not PIN numbers. If customers are not comfortable with digital modes, they will simply stick to cash.