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By accepting inbound cross-border payments allowing expats to help out family members back home, India’s Bharat Bill Payment System (BBPS) could accelerate adoption and further position it as a central tool for households to manage regular payments.
The Reserve Bank of India (RBI) has issued a new proposal aimed at opening up the BBPS to overseas Indians who want to pay bills on behalf of family members back home.
If pursued, the move would allow India’s 32m overseas citizens to pay bills for items such as utilities, telecoms, multimedia subscriptions and education services.
As of March this year, the BBPS had onboarded more than 20,000 billers, while in June 2022 alone it processed 82m transactions, an 80 percent increase compared with the same month in 2021.
Yogesh Dayal, chief general manager of the RBI, outlined the proposal to open up BBPS in a statement on developmental and regulatory policies made last week.
He added that making the BBPS a cross-border service would benefit all current BBPS billers in an “interoperable manner”, without the need for system adjustments on the part of the biller.
BBPS’ search for a market
BBPS was introduced in October 2017 to offer interoperable and accessible bill payment services to customers using multiple modes and instant confirmation of payment.
Its goal was to transform India’s bill payments market from a largely cash-based one to a digital-first model, using credit and debit transactions via banks connected to the BBPS.
There was an enormous potential market for such a service, as evidenced by a 2017 Global Findex/World Bank survey, which found that only 3 percent of Indians had used the internet in that year to pay utility bills.
However, now into its fifth year of service, the BBPS has arguably failed to produce the transformational impact that its creators envisioned, especially when compared with the widespread adoption of other payments services such as Universal Payments Interface (UPI).
In the year to June 2022, there were 786m transactions processed by BBPS. With the number of households in India estimated at around 300m, this represents just 2.6 transactions per household per year.
This is despite the added benefits that BBPS claims to offer its billers and users, including uniform fees, a standardised payment experience for customers and a centralised customer grievance redressal mechanism.
School's in
By offering Indians working overseas a potentially more efficient way to pay their family’s bills, BBPS will hope that it will not only grow volumes, but help it further embed the service as a vital way in which Indians manage their household bills.
However, its international expansion also makes sense given the specific use case that BBPS initially established for itself.
Although BBPS is designed to support a wide range of utility bills and other regular payments, currently the vast majority of billers (more than 95 percent) are educational institutions.
There is a significant market opportunity for BBPS to reduce the friction of Indians living abroad who want to pay the private school fees for their children back in India.
In 2020, a study by India’s Central Square Foundation found that almost 50 percent of Indian students are enrolled in private education, which amounts to about 120m students in total.
The enormity of India’s private education sector could potentially open up a high volume of cross-border transactions for the BBPS, and these transactions are also likely to be of much higher value than utility bills or other subscriptions.
Any ambitions by the RBI to expand BBPS internationally could, however, be hindered by its own recent intervention into India’s recurring bill payments market.
In October last year, major banks and technology giants such as Apple, Google and Zoom took issue with a new RBI directive on recurring bill payments that came into force on September 30.
The directive requires that banks, financial institutions and payment gateways obtain additional approval for recurring payments of 5,000 rupees ($63) or more.
Given that school fees are likely to be above this threshold, this could create potential frictions for international customers.
To obtain the approval, payers must complete one-time registration, an additional factor of authentication (AFA), and must also authenticate each monthly payment 24 hours before the transaction is scheduled.
The directive affects all recurring bill transactions — both credit and debit — and was seen as adding unnecessary friction to what could be a fast-growing market.
Writing for Indian business and management site The Ken, one executive, Praveen Gopal Krishnan, described the directive as an “obstacle course” for businesses and consumers.
“In one swift move, the RBI effectively killed all recurring payments in India,” said Krishnan. “And it was done not by an explicit ban, but by adding layers of consent on top of it, which added friction.
“Of course, the RBI justified this the same way most regulations are justified: We did it for the consumers.”
