BharatQR: Untapped Potential or Lost Opportunity

Officially launched on Feb,2017; BharatQR is world’s first interoperable and low cost acceptance solution, developed by National Payments Corporation of India (NPCI), Mastercard, and Visa.

BharatQR was devised based on the direction set by the Reserve Bank of India (RBI) in September 2016 and its Payments Vision 2018, which outlines innovation, interoperability, and security as the three pillars to facilitate India’s transition to a less–cash society.

BharatQR has two very important benefits. First, consumers will not need to scan different QR codes at the same merchant provided by the different payment networks. Second, merchants will only need to display one QR code at the storefront or through the acquiring bank’s mobile application via UPI, IMPS or Visa/MasterCard/RuPay Cards.

With this one would assume that by now BharatQR must have become the default for on-boarding small merchants specially considering unlike PoS terminals, the cost of acquiring is practically zero for QR case based payments since there is no device to be purchased and managed, no key management, no stationary, not even the cost of telephone line/SIM. With BHIM, PhonePe, Google Pay and PayTM being so popular among consumers for small payments it’s obvious that on paper BharatQR has everything going in its favour to become the leading payment mode. Still the ground reality says another story. Adoption of BharatQR is nowhere even close to BHIM QR (UPI).

To be honest I have so far not come across a single merchant, who is actively using BharatQR as a major payment acceptance method. When BharatPe decided to get into the business, why they chose BHIM QR over BharatQR, given than BharatQR clearly gives them access to much larger number of payment instruments on consumer side, while keeping the merchant side efforts the same?

In my opinion, the reason BHIM is everywhere, while BharatQR is nowhere to be seen is in the way different custodians (NPCI, Visa and MasterCard) have approached the problem. UPI is an open platform where the baseline is defined, improved and maintained by NPCI, while PSPs are free to innovate on top of that layer to create suitable user experience depending on their target consumer base. (By the way, this is where Banks fail miserably, because they don’t clearly know who their target persona is for their digital products. This is a discussion for another post.) NPCI is fine whether customer chooses to use UPI or his RuPay debit card for any payment, in the end an NPCI product is used and customer savings account is debited either way. On the other hand everything about Visa and MasterCard has to follow the card framework, even when it is not the best way in a particular situation.

Based on my many years of interactions with NPCI, Visa and MasterCard, I can clearly say one thing, NPCI is not too hung up on card world. They are ready to explore beyond cards and in fact now RuPay card would be a smaller component of their overall portfolio. In fact even when it comes to cards they are not treating traditional benchmarks and standards as cast in stone and are not afraid of colouring outside the lines. While Visa and MasterCard are always insisting on not touching the core, which restricts the innovators to a large extent because of the constraints of the core offering. BharatQR from Visa perspective is a variation of mVisa, which is built on Visa direct (formerly known as VMT or Visa Money Transfer) primarily built for Card to Card money transfer. Same goes for MasterCard leveraging MMS or MasterCard Money Send. Another handicap for Visa and MasterCard is that unlike UPI, they do not have someone called PSP (the role played by Google Pay, PhonePe, BharatPe etc) and are completely dependent on acquiring banks to push the product. As I have mentioned again and again banks are not the innovators.

How many of you know that your Visa, MasterCard and even American Express card would work at BharatQR? Have any of you received any communication from your banks regarding how to go about it? Two of the banks I have worked for in the past and am their customer HDFC Bank offers BharatQR scanning through their PayZapp app and Kotak Mahindra Bank offers it through their mobile banking app. Most of the banks participate in this program however none of them seem to have put in any significant effort to make sure it is adopted at a scale.

I tried to find BharatQR numbers through various sources however I couldn’t find any credible source reporting these numbers separately. While everyone talks about UPI success story in my opinion a large part of that story is because of BHIM QR. It wouldn’t be an exaggeration to say that entire P2M story of UPI is heavily dependent on BHIM QR. This also shows how much of a missed opportunity it is for the card schemes like Visa and MasterCard. NPCI is fine whether it’s UPI or RuPay card being used for payments. Visa and MasterCard are clearly missing out on this new wave of digital payments. During my research I found that NPCI and Visa websites at least have dedicated space to talk about BharatQR, however I could not find anything regarding same on MasterCard website. Looks like Visa is at least still trying, while MasterCard has already given up.

What needs to be done? From long term perspective, the answer is very clear. May be it is right time for Visa and MasterCard to reinvent the wheel. Think beyond traditional card framework and build something suitable for mobile first world from scratch. (I am hoping there are teams already working on this mandate internally in both these organizations). For short term, Visa and MasterCard need to put extra effort to handhold organizations like BharatPe, Khata Book and OK Credit etc to ensure they adopt to BharatQR standards for their merchant base. Visa and MasterCard both have their payment gateway business Cyber Source and MPGS respectively, integrate BharatQR there even if it is to create sample cases to showcase how easy it is to adopt BharatQR for payment providers. Lastly instead of telling merchants to get in touch with their acquirers if they want to adopt BharatQR, do it for them (at least in the beginning).

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