Bill payments set to change in India as new BBPS system guidelines released

So much is changing in the way people pay in India. As Axis Bank introduces WhatsApp for P2P mobile payments, and mobile operators launch mobile wallets, it was inevitable that the pain point of bill payments had to be addressed, and this would need to change fast. Here's a bit of background on what's proposed.

As the RBI released final guidelines for the Bharat Bill Payment System (BBPS), I caught up with NPCI expert Sumeet Kohli to understand how this works.

Who is NPCI?

NPCI manages core payment systems including IMPS, AEPS, RuPay, NFS and others. Currently the buzzword in India Payments is "pro-digital" and 900+ mobile subscribers are being connected into a vast network of services. BBPS proves to be one that holds much promise, but will also be a huge challenge to implement.

What must a bill payment system achieve?

There is a need for an integrated system in the country, to offer interoperable and accessible bill payment services to customers through a network of agents.

This must allow multiple payment modes and provide instant confirmation of payment. It must serve as an efficient, cost effective alternative to the existing systems, thus, setting the standards for bill payments in the country. It must enhance consumer confidence and experience, as expectations rise at a fast rate with the penetration of mobile phones and access to digital services.

The BBPS Architecture

As per RBI guidelines NPCI will function as the authorized Bharat Bill Payment Central Unit (BBPCU) to set the standards for processes which need to be adhered to by all operating units under the system. NPCI will also undertake clearing and settlement activities related to the BBPS.

The BBPS will consist of two types of entities carrying out distinct functions:

(i) Bharat Bill Payment Central Unit (BBPCU) which will be the single authorized entity operating the BBPS. The BBPCU will set necessary operational, technical and business standards for the entire system and its participants, and also undertake clearing and settlement activities.

(ii) Bharat Bill Payment Operating Units (BBPOUs), which will be the authorised operational units, working in adherence to the standards set by the BBPCU. The tiered structure could be further strengthened through effective agent networks of the BBPOUs.

While there will be a single BBPCU, there could be multiple BBPOUs operating under the BBPS. 

Challenges for Implementation

Implementing this though is not without challenges.

It involves multiple players including the NPCI, banks, aggregators, technology vendors, service providers and billers, across locations and multiple channels.

This must support online bill payments as well as offline. It combines on-us and off-us use cases and will require huge efforts to integrate and operationalize all that needs to happen. It will also require focussed marketing so as to make the masses aware of the availability and desirability of the new ways to pay.

A high level overview of the system is shown in the diagram below and a link to the guidelines as well as more details on this are available at Sumeet Kohli's interview.

Your views

With all of this already seamlessly working in many countries around the world, it may seem like a trivial exercise - why not just lift a blue print from somewhere and implement it? It is not that easy. And in each emerging country we study, there are non-trivial differences as people start to pay bills digitally.

Do you have more examples? How do you see this working? Would be great to hear your thoughts!