Mastercard, Visa And Rupay Come Together To Launch BharatQR For Digital Payments
QR code-based payments can eliminate the need for cards and swipe machines.
Come Monday, Indians will have yet another way to pay.
This time, it’s a QR (quick response) code-based payment solution that will allow merchants to accept digital payments from those who hold a debit card even if they don’t have a card swiping terminal. The product, called BharatQR, has been jointly developed by Mastercard Inc., Visa Inc. and Rupay. It will be formally launched on Monday in Mumbai.
It becomes the second major digital payment option being promoted by the government after the Unified Payments Interface (UPI) based BHIM app. Both are being pitched as an alternative to cash following the November 8 demonetisation decision. While currency availability has now started to normalise, the government is trying to encourage digital payments by making them more convenient and cost effective.
How QR Code-Based Payments Work
A QR code-based payment system works on the existing network of card companies like Mastercard, Visa and Rupay. This means that anyone holding a debit card from any of these providers can pay using a QR code, provided they have downloaded an app from their bank which supports this payment option.
If a customer has the app and wants to make a payment at a merchant who doesn’t have a card swiping machines, he can simply scan the merchant’s QR code and transfer the money directly from the bank account.
Private payment firms like Paytm already offer this facility, but both parties need to have a Paytm account to use it.
BharatQR attempts to overcome this limitation by allowing people to pay without having to choose one payment network over another. This will, however, need a large number of bank apps to support such payments.
QR-based payments have an added advantage of being infrastructure-light. This means that a merchant doesn’t require a lot of equipment to accept digital payments, which reduces costs.
Such a payment system has the potential for take off as it falls under the digital point-of-sale solution segment, for which the Reserve Bank of India (RBI) recently proposed lower merchant discount rates in its draft circular.
Moreover, penetration of card payment infrastructure in India is abysmally low. As of October 2015, there were only 12 lakh point of sale terminals in the country and there are only 6.7 card transactions per capita, much lower than Russia’s 47 and Brazil’s 55, according to a March 11 report by the National Payments Corporation of India and JM Financial Ltd.
A Crowded Payment Ecosystem
The launch of BharatQR will add to an already crowded market for digital payments. There are at least a dozen non-cash payment mediums out there including UPI, mobile wallets, net banking, debit cards and soon-t- be-launched Aadhaar Pay, among others. Individual firms like Paytm also have their own QR- and non-QR-based payment products.
Not all such products have worked.
For instance, Mastercard had launched a QR-code pased payment system in November 2016 called Masterpass. This product, however, remained limited in its reach as it was launched with a tie-up with only RBL Bank. Mastercard will now work with the government to develop BharatQR, which is a wider cross-platform product, Murali Nair, senior vice-president for market development-South Asia at Mastercard, told BloombergQuint in a response to an email on January 23.
Visa declined to comment on the story.
Note: This story has been altered following a clarification from Mastercard that Masterpass had only tied up with one bank.