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RBI wants bill payment aggregator to address interoperability issues; draft guidelines

Existing bill payment services, which are “safe and robust”, do not fully address the needs of the customers to pay a variety of bills, including utility bills, school/university fee, municipal taxes, etc. due to the lack of interoperability in the bill payment processes as well as the lack of access to various modes of electronic payments by a vast majority of customers, the Reserve Bank of India has said, while releasing a set of draft guidelines for “Bharat Bill Payment System (BBPS)”, a payments aggregator.

There is “a need for an integrated bill payment system in the country that offers interoperable and accessible bill payment services to customers through a network of agents, allows multiple payment modes, and provides instant confirmation of payment. The bill payment system should also serve as an efficient, cost effective alternative to the existing systems, thus, setting the standards for bill payments in the country, and enhance consumer confidence and experience.”

An RBI committee had estimated that over 30.8 billion bills amounting to Rs 6223 billion are generated each year in the top 20 cities in the country, and payments are collected primarily via cash and cheque, mostly at the Billers’ Own Collection Point.

The lowdown on BBPS:

1. Two tiered approach, with two operating entities:
– Entity operating the Bharat Bill Payment System (BBPS) (henceforth called as the BBPS ), which will set the standards related to payment, clearing and settlement processes
– Bharat Bill Payment Operating Units (BBPOUs), which will be the authorised operational units, working in adherence to the standards set by the BBPS. The tiered structure could be further strengthened through an effective establishment of agent network/s by the BBPOUs.

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2. Existing players to be a part of BBPS: “The participants in the BBPS will include authorised entities, such as, the entity operating the BBPS itself, the BBPOUs as well as their agents, payment gateways, banks, billers and service providers, and other entities as required under the BBPS. “The existing players in the online commerce segment catering to the requirements of bill payments as well as aggregation of payment services (in relation to bill payments) will be a part of BBPS.”

3. Key eligibility criteria:
– Net worth of at least Rs 100 crore as per the last audited balance sheet and the same has to be maintained at all times, and incorporated in India.
– The company must have professional senior management team headed by a Chief Executive (CEO) having the required credentials and experience in transaction processing.
– The company should have experience in handling central infrastructure in payments, clearing and settlement and transaction processing.
– The company must have domain experience in the field of bill collection/services to the billers. The entity should have the relevant experience in transaction processing, preferably in the bill payments area for a minimum of one year.

Interestingly: “Entities falling under the scope of BBPS and not meeting the eligibility criteria as above, but desirous of continuing business in this domain as a BBPOU, will need to seek time of one year from the date of release of final guidelines on BBPS to meet the eligibility criteria. Alternately, they may decide to partner with other eligible and authorized BBPOUs.”

4. Fund raising: necessary approvals need to be sought from Department of Industrial Policy and Promotion (DIPP) under the consolidated policy on FDI and regulations framed under the Foreign Exchange Management Act (FEMA).

5. Authorization of BBPS: the entity fulfilling the criteria as set out above for BBPS will seek authorisation under the Payment and Settlement Systems Act, 2007. There will be only one entity authorized as the BBPS under the envisaged tiered structure.

6. Authorization of BBPOU:
– Need to take one-time approval of the Reserve Bank of India.
– Entities with in-principle approval will need to “obtain necessary certification from BBPS regarding their adherence to the BBPS standards for processing bill payments, before becoming eligible to receive final authorization / approval. This would be in addition to the usual terms and conditions for final authorization / approval.”

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7. Settlement model:
– There will be two types of transactions: ON-US and OFF-US. That is, the Operating Units will have billers who have been on-boarded by them, and those who haven’t, similar to telecom networks, where customers can be On-Net and Off-Net.

– The BBPOUs will take care of ON-US transactions, and for OFF-US transactions, it will pass the transaction to the BBPS, which will act as a clearing and settlement body. “The BBPS will arrange to instruct the settlement bank to make pay-outs to respective billers’ banks for credit to billers’ accounts”…”Based on the net payment obligation arrived at by BBPS, each BBPOU will pay/receive the funds through the settlement bank arrangement put in place by the BBPS.”
– On settlement, the BBPOU will have to make available the transactional details of the settlement to the billers and the agents under it for MIS, reconciliation and customer service/grievance redressal.

– “There would be many payment modes used by the end-consumers to make the bill payments, each of which would have its own realisation cycle depending upon the nature of the payment mode. Hence, the BBPS will also set standards on time discipline for realisation and collection of payments in each leg i.e., from the agent to the BBPOU, from the BBPOU to the biller in the case of ON-US settlement and further from BBPOU to BBPS and thereafter to the biller (through the concerned BBPOU) in the case of OFF-US settlement.”

8. Grievance redressal:

– BBPOUs shall disclose all important terms and conditions in clear and simple language (preferably in English, Hindi and the local language) comprehensible to the customers of various billers/users of its services. These disclosures should include: All charges and fees associated with the use of bill payment facility, and the customer service telephone numbers and website URL.
– BBPS will put in place a centralized end-to-end complaint management system for all ON-US and OFF-US transactions. Till such time the centralized complaint management system can be put in place, to begin with, the BBPS will facilitate at least the centralized ticketing/lodging of complaints (against any biller) from the end-consumers at any of the BBPS points, even though the final redressal will be handled by the respective billers/BBPOUs.
– Each complaint will be assigned and identified by a unique complaint reference number within the BBPS. After the complaint is lodged at any location, the BBPS and/or the concerned BBPOU will escalate the complaint to the respective biller for redressal. A suitable tracking system has to be enabled so that the fate of the complaint is known to the customer (on the basis of the unique complaint reference number) at any location.
– In order to facilitate faster implementation and operationalisation of the BBPS, in the interim, the complaints redressal will be handled by respective billers through their operating units as per present arrangements. All participants in the BBPS will be required to submit report on customer complaints in the format and frequency as may be mandated.

9. Roles and responsibilities of Bharat Bill Payment Operating Units (BBPOUs)
– On-boarding of billers and aggregators as per standards / rules, appointment of agents; carrying out due diligence (as per processes and rules set out for appointment of sub-agents); and ensure confidentiality and privacy standards are in place.
– Infrastructure development – Application development, including APIs where required, by respective BBPOUs – in adherence to standards set by the BBPS.
– Transaction handling – Safety and security of transactions, verification of biller information, adherence to transaction flow standards / rules set by the BBPS.
– Handling customer grievances and disputes as per set procedures and standards for billers / agents / end-customers.
– Value-added services – provide MIS and Reporting and other services to the billers / aggregators / agents.

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Future Plans
– “In future, the scope of BBPS could be extended to include services facilitating the collection of repetitive payments, such as, school / university fees, municipal taxes/payments etc. and also other e-commerce service content as decided from time to time by the Reserve Bank of India.”

Quick take

This appears to be an instance of bringing multiple bill payment entities within a regulatory framework. The RBI should take a leaf out of the TRAI’s book, and define standards and enforce interconnection, rather than set up another government entity for clearing settlements, and bring payment aggregators and their services under the mandate of the regulator. To wit, we wonder if telecom operator bill payment services like Rechargeitnow, Freecharge and Paytm would have been allowed, if they had to seek RBI approval to allow bill payment.

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