RBI Widens the Scope in BBPS to Increase Non-Bank Entities Participation

A New Regulation is in place for Non-Banking Entities

In view of making a substantial expansion in payment landscape through various payments system like Unified Payments Interface (UPI), Internet Banking, Pre-paid Payment Instruments (PPIs), RBI felt the need to review and update their regulations. The new regulations allow a number of non-banking payment providers to participate in Bharat Bill Payment System (BBPS) as operating units. As a result, RBI has placed a revised regulatory framework known as “Bharat Bill Payment Systems Directions, 2024” wherein around 32 entities will be allowed to act as Payment Aggregators (PAs).

What is Bharat Bill Payment Systems (BBPS)?

• It is a concept brought in by the regulator itself, RBI, to offer technological solutions in regards to online payment transaction for both, the customers and businesses.
• The RBI wanted to provide one system for all transactions to pass through. For example, if Paytm, Google Pay, Amazon Pay had their own payment gateway for transactions, then RBI would have had to regulate each gateway.
• The payment service providers would have used many schemes to offer a customer if not for BBPS, resulting in an unprecedented conflict of interest. Sure enough, regulating so many gateways would have been a task for the governing body as well.
• While regulating payment gateway is one hurdle on the track, various other hurdles include,
  • Difficulty in maintaining records of collections of bills for merchants and banks
  • The difficulty of making separate payment at different collection centre
  • Unavailability payment options
  • Restricted operational hours and also the location of collection centres being set-up in city outskirts or towns, etc.

Hence, RBI laid out one solution for all, Bharat Bill Payment Systems (BBPS).

For BBPS to function as the one and only payment operating system, it has a central unit named as The Bharat Bill Pay Central Unit (BBPCU). It works on derivatives that mainly focuses on:

• Setting various procedures and process for businesses
• Either making settlement or clearing transactions of BOUs and COUs with their respective agent institutions
• Manging consumer complaints and disputes
• Having a proper fraud risk management system and also an appropriate Management Information System (MIS)
• Increasing participation of entities in to Operating Units

Who are the participants?

As mentioned in headlines, that RBI is widening the scope of BBPS to have non-banking entities as operating units, also means that there are other participants already active in the system. So, who are these participants and what do they do? Here’s a list of participants.

1. Bharat BillPay Central Unit
   • We already know that Bharat BillPay Central Unit acts a as the single authorised entity operating the Bharat BillPay platform. It is their responsibility to have agents, agent institutions, BOUs or COUs as part of the BBPS system.
2. Developers
   • Developers are empanelled in the system to provide tailor-made solutions to billers or operating units.
3. Billers
   • Any service provider who generates a bill for collection of payments for the services they have offered are known as billers. The payment of bill through online payment systems is part of the BBPS.
4. Agent
   • Agents are required for management of all kinds of transactions made in a local area like a provisional store or a post-office or even bank transaction.
5. Agent Institutions
   • With so many agents participating in BBPS obviously requires a its own system to mange the agents of a locality, we have agent institutions. However, agent institutions are not directly a part of RBIs authorization.
6. Biller Operating Units (BOUs) / Customer Operating Units (COUs)
   • BOUs and COUs are similar to agent institutions managing the institutions itself but they are authorized by the governing body, RBI.
7. Customer
   • The most important participant of the whole system is a customer, who can be a resident or a non-resident of India but still a part of BBPS.

By introducing Bharat Bill Payment System (BBPS), RBI has brought in standardization of online payment system. To improve the tangibility of online payment eco-system, RBI is widening the scope of BBPS and allowing participants from the non-banking domain. RBI has managed a smooth functioning in the online payment eco-system.

Results of Updates so far…

• Around 18 non-banking firms participating in this scope, that includes Razorpay, Amazon Pay, Cashfree have received a nod from RBI.
• Some companies, close to a count of 32 non-banking organizations have received in-principle authorization to act as Payment Aggregators (PAs).