BharatQR-a disruptive force in digital payments

On the heels of the launch of BHIM app, the central government has launched BharatQR code which will make retail electronic payments mush more seamless. This launch will make usage of the card redundant and make the digital payment much faster, seamless, easier, safe etc. Before discussing the Bharat QR let us understand what QR code (Quick Response Code) is.

 

Quick Response (QR) Code 

A QR code is a two-dimensional (black squares arranged in a square grid on a white background), machine-readable optical label which contains information about the item to which it is linked. These QR codes are different from the traditional UPC (Universal Product Code) barcodes which are made up of numbers and horizontal lines, apart from this the QR codes contain more information compared to the UPC barcodes. Apart from this another point of difference is that the QR code can be scanned faster than the UPC barcodes. The usage of QR codes has been expanded in various fields precisely for these reasons. We can see the QR codes being used in various advertisements wherein the scanning of the code may lead directly to the point of interest rather than taking the usual surf and find approach.

 

Some of the day to day activities where we find the usage of 
QR codes
  • Paytm uses the QR codes
  • bookmyshow app
  • The newspaper ads
  • Whatsapp on Desktop etc

 

Current status of QR code in India
  • Presently we have closed systems which allow for the QR code based transactions i.e. most of the banks use the mVISA (and this facility is only for the VISA cardholders)
  • Although Paytm is not a bank (in the sense a traditional bank), but it uses a QR code for payments (it is a closed system). It has announced that it plans to invest Rs 600 Cr in the next 10 months to further enhance its QR payment solutions.
  • The MasterCard also has launched Masterpass QR in November 2016, which allowed the customers to make face-to-face purchases using their smart phones. The other feature of Masterpass is that it is interoperable (the payment can be done by scanning the QR code irrespective of the card platform. For example although Paytm allowed payment through QR code, both-sender and receiver-must have a Paytm account)
  • The central government post the demonetisation has asked the three major payment companies-MasterCard, VISA and RuPay-to come out with an interoperable QR code solution.

 

What is BharatQR Code?

The BharatQR code has been developed by the four major payment companies – MasterCard, VISA, RuPay (NPCI-National Payments Corporation of India) and American Express. The directions and guidelines for the above have been issued by RBI (it is a part of RBI’s Payment Vision 2018 which outlines the need for 3 pillars- Innovation, Interoperability and Security- to transition India into cashless economy). It is the world’s first interoperable solution. As a result of its interoperability the merchants can now display only one QR code rather than multiple ones (which were specific to card platforms).

BharatQR has two types – Dynamic and Static. In the Dynamic, the merchant generates one QR code for each transaction which would be scanned by the customer with his Smartphone and the transaction would be authorized by entering the pin/password (here the customer need not enter the amount as the merchant would have already entered it while generating the QR code). In the Static, the merchant will simply display the QR code on a cardboard (which we can see now in the market very predominantly being pushed by Paytm), scan it using his Smartphone, enter the amount and then authorize it by entering the pin/password.

Another important point here is even the non-smart phone users will be allowed to make the payments under this (the payment companies are in talks with the government to allow usage of the codes on the lines of *99# via USSD).

 

Advantages of BharatQR code
  • It is interoperable hence the consumers need not scan different QR codes at the same merchant provided by different payment networks
  • Merchants will only need to display one QR code at the storefront or through the acquiring bank’s mobile application
  • The costs associated are also on the lower side (such as for Point of Sales infrastructure)
  • The banks will follow KYC norms/guidelines for customer as well as merchant acquisition. Hence this along with operation guidelines and dispute management makes BharatQR secure, safe and robust system

 

 What impact will BharatQR code have?

Post demonetisation, the government has been pushing digital payments through various policy measures-BHIM app, Lucky Grahak Yojana, Digi-Dhan Vyapar Yojana. One of the shortcomings has been from the side of the small merchants who are reluctant in accepting the digital payments

  • PoS machines involve high initial capital investment (approximately Rs 7,000 per unit)
  • There has been a severe shortage of these machines (there are around 14 million small traders and only over a million PoS machines)
  • Part of the shortage of supply of PoS machines is because there are no incentives for companies to increase the manufacturing in order to meet the demand

Hence the introduction of BharatQR code will overcome this challenge and will prompt the small traders to accept digital payments.

 

Is BharatQR another e-wallet?

The answer to this question is “NO”. The wallets such as Paytm, Mobikwik etc use the QR code for payment services but these are closed systems (for amount to be transferred both parties-buyer and seller- should have these accounts) but the best part of BharatQR is that it is interoperable. BharatQR is an alternative to PoS machine.   

As of now more than a dozen banks have agreed to implementation of BharatQR code

  • Axis Bank
  • Bank of Baroda
  • Bank of India
  • Citi Union Bank
  • DCB Bank Ltd
  • Karur Vysya Bank
  • HDFC Bank Ltd
  • ICICI Bank Ltd
  • IDBI Bank Ltd
  • Punjab National Bank
  • RBL Bank Ltd
  • State Bank of India
  • Union Bank of India
  • Vijaya Bank
  • Yes Bank Ltd.

Hence with more than 700 million mobile phones and over 800 million cards, the BharatQR will not only push the agenda of the government to transition India to Cashless economy but also promote Financial Inclusion. 

 

Approach to UPSC Exam: GS PAPER III 
  1. BharatQR is a favourable disruption in the digital payment infrastructure-Explain
  2. BharatQR will not only promote digital economy but also financial inclusion-Analyze

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