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On road to less cash, an attempt to bypass card swipe machines

BharatQR code, an interoperable payment acceptance solution, was launched on Monday to quicken the move towards a less-cash economy at an ‘insignificant’ cost. The Indian Express explains what it is, and how it will work.

Written by Khushboo Narayan |
Updated: February 22, 2017 12:23:07 pm
BharatQR, BharatQR code, digital payment, what is BharatQR code, interoperable payment, card payment, how to use BharatQR, indian express explained A QR code essentially is a label that can be read or scanned by a machine (such as a camera mobile phone) to access account details of a merchant to make online payments.

What is BharatQR?

BharatQR is the first common quick response (QR) code developed jointly by the four prominent card payment companies in the country — MasterCard, Visa, American Express and the National Payments Corporation of India (NPCI) that runs RuPay cards.

A QR code essentially is a label that can be read or scanned by a machine (such as a camera mobile phone) to access account details of a merchant to make online payments. The QR code system is used widely in China. In India, Paytm, the Noida-based online payment and commerce company, also offers QR code-based payment.

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Currently, QR code-based acceptance systems in the country are largely closed systems. BharatQR, an interoperable QR code, has been formed on the instructions of the Reserve Bank of India (RBI) to facilitate the transition to a less-cash society. Apart from working as a common interface for the card platforms, BharatQR will also facilitate acceptance using the Unified Payments Interface (UPI), and Aadhaar-enabled payments.

How will BharatQR work?

BharatQR code will work as a digital Point of Sale (PoS) machine. Merchants will be identified with one QR code and will be able accept payment from any debit or credit card through mobile phones. For instance, a merchant with an HDFC Bank account will be able to accept payments from a State Bank of India cardholder, be it a Visa card, MasterCard or RuPay card.

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Merchants will have to pay a merchant discount rate or MDR to the issuing bank every time a transaction is executed. “We have suggested to the RBI to lower the MDR for transactions through BharatQR by 10 basis points from existing rates due to low infrastructure costs,” said A P Hota, managing director and chief executive of NPCI.

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But why do we need a common QR code based payment network?

According to R Gandhi, Deputy Governor of the RBI, the high capital expenditure and low operational expenditure associated with physical PoS terminals has been a major deterrence to the expansion of PoS infrastructure in the country. “In comparison to the 800 million-odd cards that have been issued, the number of PoS terminals has not been adequate. Gradually, with increasing mobile density in the country, a low cost, secure, interoperable mobile-based acceptance solution like BharatQR will accelerate India’s transition to a less-cash society,” Gandhi said.

How is BharatQR code different from any other wallet such as Paytm, Freecharge, etc.?

BharatQR is not a wallet. Typically, ewallets like Paytm, Mobikwik and others can enable transactions through QR code only if both the customer and merchant have the same wallet. BharatQR code is an alternative to physical PoS machines, and is integrated within the bank’s payment or mobile banking application. Unlike ewallets, it accepts digital payments from those who hold any debit or credit card — Visa, RuPay, Mastercard or Amex.

How many banks offer BharatQR?

So far, 14 banks, including State Bank of India, Axis Bank, Bank of Baroda, Bank of India, HDFC Bank, ICICI Bank, Union Bank, RBL Bank, Yes Bank and Karur Vysya Bank, are operationally ready to deploy BharatQR. According to NPCI’s Hota, over the next six months, BharatQR will be deployed by 50 top banks, and it will reach at least 1 million merchants by the end of this calendar year.

How will BharatQR impact the existing payment platform market?

BharatQR will compete with the QR code-based payment system provided by private firms to acquire merchants. Since demonetisation on November 8, companies such as Paytm, Mobikwik and Freecharge have aggressively deployed QR codes to merchants for retail transactions.

Mobikwik alone had deployed 1.4 million QR codes to merchants. Paytm, which has close to 150 million ewallet users, has claimed that 65% of its overall transactions are done through the QR code payment mechanism.

Porush Singh, Country Corporate Officer, India, and Division President, South Asia, Mastercard, said there was a huge market for cashless payment solutions in the country, and the presence of multiple firms in the QR code-based payment system would ensure better service for merchants and consumers.

“At the end of the day, it is up to the merchants to choose whether they want to use BharatQR code deployed by the banks or the QR codes offered by a private company. There is enough for every player in this business, and whoever provides a secure and reliable service with quick dispute resolution will benefit in the future,” Singh said.

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