NPCI’s new technology makes card machines irrelevant
India has one of the fastest changing payments landscape in the world. It has not even been two months since the launch of BHIM based on UPI—UPI, which is an improvement of the earlier IMPS, is itself just a few months old—and National Payments Corporation of India (NPCI) has launched yet another revolutionary technology called BharatQR. Quick Response, or QR, codes are not new and most mobile wallets have been using them for a few years—any merchant on, say PayTM, could generate a QR code which a user could scan with her phone in order to make a payment. Later, other wallets from banks also allowed generation of QR codes, but these were linked to cards like Visa, Mastercard or RuPay. A QR code allowed customers to make payments with their mobile phones instead of traditional swipe machines—to that extent, they lowered the transaction costs quite dramatically—but they had a limitation. Each debit/credit card was linked to just one system—Mastercard, Visa or RuPay. So, if you used HDFC Bank’s Payzapp which uses Visa, you couldn’t use it to make a payment to a merchant whose bank account was linked to, say, a Mastercard. What NPCI’s BharatQR does is to allow interoperability, so even someone who uses a wallet based on Visa can make a payment to a merchant who uses a Mastercard or RuPay. Potentially, this revolutionises payments and even does away with the need for swipe machines.
In the past, the problem was that the government wasn’t really promoting BHIM except through its DigiDhan Melas. In that situation, if a PayTM was spending crores to promote its wallet – its FY16 losses rose four-fold, to R1,591 crore—it was more likely to sew up the market since, at the end of the day, merchants have to be incentivised to generate QRs and place laminated copies prominently so that users can scan them with their mobile phones to make a payment. But with BharatQR now assuring interoperability, it doesn’t matter which bank is spending the money—no matter whose wallet you use, BharatQRs will ensure seamless payments. After a while, even PayTM will have to get on the platform to take advantage of this. BHIM has other advantages—your telephone number can be your address and AadhaarPay offers digital payment facilities by just using your biometrics—but even if the government doesn’t actively promote it, India’s digital payments landscape has just got another big push.