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It is official, banks have to merge UPI QR and BharatQR; implications

It is official. QR codes generated by the Unified Payments and Interface (UPI) will be merged with the ones generated by BharatQR. In a notification to member banks, the National Payments Corporation of India (NPCI) instructed them to ensure that their applications be equipped to read both UPI QR as well as BharatQR by 15th September 2017.

At the same time, the NPCI instructed all RuPay acquiring banks to integrate UPI credentials in BharatQR along with IFSC and Aadhaar credentials. MediaNama had reported in April that the NPCI was trying to merge the QR codes of the payments systems. The merging of merchant UPI credentials with BharatQR began in May when they released Merchant QR Code Specification V 4.0, the NPCI added.

To refresh, BharatQR is an inter-operable QR code network for payments which includes card networks Visa, MasterCard, RuPay and American Express.


  • What this means is that UPI apps need to support scanning of BharatQR QR format, and when scanned, the apps will have to pick up the embedded UPI virtual address and complete transaction.
  • The UPI and BharatQR have different merchant discount rates (MDR) so it will be a challenge for card networks and the NPCI to sort out where the transaction is originating and charge merchants accordingly. MDR is an interbank fee levied by banks on merchants to facilitate a digital transaction.On the UPI, merchants are charged a merchant discount rate (MDR) of 0.25% for payments below Rs 1,000 and 0.65% for all other charges. Meanwhile, the RBI is proposing a differentiated MDR for card networks which use QR codes. More on that here.
  • This also means that card networks can easily become part of the UPI if they harmonize the charges on merchants. The draft paper for the UPI mentions that card numbers can be used as an identifier. It mentions a specific example for RuPay:

    RuPay card number, resolved directly by NPCI, is represented as card-no@rupay.npci (e.g. 1234123412341234@rupay.npci)

    The draft paper also says that the UPI can allow other regulated providers to become a payment system provider. Technically, card networks such as Visa, MasterCard and RuPay are regulated entities by the Reserve Bank of India.

What payment companies can learn from PayPal

In a situation where a merchant has to worry about charges coming in from different payment systems, it would be wise for payment companies to charge a flat transaction fee per month rather than charging for every individual transaction. PayPal mentioned that its approach to partnership is to look at ARPU and not at earnings per transaction: In the last call, the company said that they’ll have some transactions where they’ll make a good margin, and others where they have zero cost and zero revenue, but drive more usage of Paypal.

Wallets are still not allowed

Meanwhile, wallets such as Paytm and MobiKwik, which pioneered QR code payments in India, are still not allowed to be part of the UPI or BharatQR. Remember that banks wanted to keep wallets out to get an advantage over them. Asbe, however, pointed out the decision of allowing wallets to be part of the UPI will still be after the Reserve Bank of India (RBI) finalizes the guidelines. “There is a draft policy document from the RBI so I’m sure once the things are discussed things will be formed,” acting CEO Dilip Asbe had said.

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