The advent of Bharat Interface for Money (BHIM) has brought a disruption in the payment ecosystem. The mobile app slated to be the future of mobile based payment transfers was launched by none other than Mr. Modi himself ,has clocked over 1.7 crore downloads and is being labeled as a boon for the popularity of the Unified Payment Interface (UPI).
In today’s world when governments has no business to be in business the popularity and fanfare around the much talked about BHIM app is something to wonder about. In today’s capitalism driven economy when governments vouch toward reducing the size of government by ceding the space to private players and mainly focusing on the enabling provision , this is something which don’t bode very well with the much touted slogan of ‘Minimum Government and Maximum Governance’. But considering the recent happenings in the space of digital payments and the overall appeal around BHIM opens up a new pandora box regarding the capability of the existing players and immense opportunity in this space. Though all mobile wallets like Mobiwiki , Freecharge and Paytm etc has considerable amount of user base but the scale and speed at which BHIM is capturing the market is something to ponder about and especially when it was conceptualised very late in the game and was developed and tested around the heat of the demonetisation when already established players were already reaping on the fruits of cash crunch. So what makes BHIM stand apart ?
First of all the very basic limitation with the mobile wallets is their nature of speaking to themself only. If i am a paytm user then i can communicate with a person who also has paytm and people don’t like that. This concern is very well address by BHIM as it is an open end UPI based (details below) system wherein a person with a bank account is able to communicate with another bank account irrespective of Logo of the bank. This is the key driver behind BHIM popularity as when it comes to making payments people don’t want to limit themself with only a particular option. The second factor is direct connectivity to bank account , whatever money you send or receive is directly debited or credited into your bank account and keep earning interest unlike wallets. This also save the cost and time to transfer balance from your bank account to wallet and then again wallet to bank account , this also simplify the overall process as it reduce a very tedious step from the overall process. Third is people’s belief on government backed options when it comes to finance , though this might not be the major driver but it definitely has a role to play. UPI around which BHIM operate is also government backed initiative , it was launched in early 2016 but never picked up the pace it was suppose to even during the demonetisation though almost all major banks were offering their own UPI app. The primary reason behind same was lot of confusion due to availability of tons of UPI app and a firm government backing and publicity. It was out of these blues that BHIM was conceptualised and designed as it was felt that UPI is not performing to it’s potential and it has to fire with all cylinder if we need to realise the dream of having a less cash economy.
So what it brings on board ?
Government deserve a credit for taking the right call at right time to come with the idea of one universal UPI app in such a short span of time. There might be a discussion around whatever it was a bit late in the game or not but there is no doubt that it is the well thought out decision. The ever increasing download of the app and the increasing transaction values clearly depict the same. In addition to offering a convenient and easy way of transferring money, it also address many of the bottleneck with existing digital infrastructure especially involving the transaction costs which kind of act as a disincentive for digital transaction and push people towards choosing cash. It operate completely on infrastructure owned and maintained by National Payment Corporation of India (NCPI) and don’t have any obligation toward third party entities unlike Master or Visa card. In addition to this this also solve the problem of penetration as the USSD version of the BHIM can be operated on the feature phone over GSM network (*99#) just like checking your mobile phone balance .
So does all road leads to heaven ?
It all seems painted in decorative colours but there are many problems that need to be taken care if this momentum has to be sustained in the long run. Primary of these is maintaining and developing a business model so that usage of the same remain free of any sort of charges. Besides this, a dedicated customer care service need to be on boarded because as user base will increase there will definitely be some technical/functional glitches which need to be addressed in timely manner in order to maintain the customer confidence level. The avenue of app usage also need to be increased as currently there are very few merchants or utility providers onboard and this is something that need to be dealt sooner. Government also need to continue working on the security aspect to keep unethical hackers at an arms length as any small dent from that perspective may leads to erosion of customer base and last but not the least ,app user base need to be increased as there are around 350 million smart phone users and at least 50% of that should be targeted.
Though there are many grey area but it can’t also be denied that UPI and BHIM are a grass root level innovation ,suitable and crafted keeping in mind the domestic situations and offer an out of the way solution to the problems which hold this young nation back from leapfrogging toward a fair and innovative payment solution. As a nation we have all the required talent and will to reach to zenith in any sphere, all it require a little efforts from you and me. So let’s do our bit to spread this love from BHIM. Here are the links :
Q&A on UPI and BHIM.
What is UPI ?
- UPI is an interface developed by national payment corporation of India (NPCI) in order to mitigate the shortcomings of individual core banking solution (CBS) which are incapable of communicating with each other. For example a bank is capable of communicating all transactions happening between various branches across the nation but it is not capable of communicating directly with any other bank . You can also say that it was lack of foresight of policy makers that no one though about that when banking was going digital.Had a proper policy has been put in place a fully connected banking system could have solved lot of current problems ranging from real time money transfer to stopping black money accumulation in multiple bank accounts. All This make CBS a kind of close end system and put in hurdles in free flowing of money across banks. UPI address this to an extent by creating a wrapper around Immediate Payment Service (IMPS) so that bank accounts can be identified by simple Virtual payment addresses (VPA) and people can transfer money using those VPA in real time.
If IMPS is there what was need of having UPI ?
In order to transfer money using IMPS customer need to know the account number and the IFSC code which is very cumbersome to remember.This was a major shortcoming of this system which was holding it back. UPI address this by identification of beneficiary via simple Virtual payment address so if i need to send money to someone i just need to enter his/her VPA and it will be resolved in the background to his/her account number. For example our VPA can be something like OExxxxxx@sbi and if anyone need to make us any payment through UPI then s/he just need to enter this without worrying about our account no and the IFSC code. This whole process makes money transfer as easy as sending as whatsapp message and thats the reason that UPI has been described as whatsapp of payment system by Mr. Nandan Nilekani.
What was the Need for BHIM then ?
UPI was launched in around early 2016 but response to the same has been very mute. One of the reason behind same was complexity around the system and lack of public awareness. The onus of popularising the same was left on the banks and every bank came up with their own UPI app. Though UPI being an open ended system was suppose to work across each bank app but there were many hurdles and complexity around that. It was because of this reason that even during the demonetisation when all other mobile wallets transactions was skyrocketing there was not proportionate shoot up in the UPI usage. It was because of this reason that govt and NITI Ayog came up with the proposal of having a single UPI app in order to let it realise it’s true potential and this is how our BHIM was born….
What are advantages of using BHIM ?
BHIM can be labelled as unadulterated and uncontaminated form of UPI. it is a very simple yet robust app to enable UPI based payments. It is fast because of it’s very small size (2-3 MB on android and 4-5 MB on iOS) and amazing yet simple UX/UI design. Unlike mobile wallets BHIM operates directly on your bank accounts and any money you send is transferred from your bank account directly and whatever you receive goes directly to you account and you earn interest on same. On top of that transactions are free and there is no cost involved. So apart from making money transfer easy this will also help to bring down the cost of digital transaction which is a major bottleneck and encourage people to go with cash. In addition to this BHIM create a default VPA for every user which is mobileNumber@upi. For example if my number registered with bank is 999999999 then as soon as i download BHIM a default VPA 999999999@upi will be created for me and any other BHIM user can send me money using same.
What is the Role of Aadhar in BHIM ?
Latest version of BHIM has also been integrated with Aadhar. Now apart from sending money using VPA and account + IFSC code there is an additional option to send using Aadhar number. This is quite important from rural area perspective and many rural folks don’t have phone so this option will come handy in all such cases. In order to transfer money using Aadhar , you simple need to punch in the Aadhar number of the beneficiary and money will be directly transferred to his/her bank account if mentioned Aadhar number is linked to beneficiary bank account and all this happens within seconds on real time basis with ZERO transaction fees. The future version of the BHIM will bring in real time integration with Aadhar through biometric authentication. with advent of this India will really leapfrog in terms of payment ecosystem by many years and paying to merchant will become quite easy without any need of even a debit card. All you will need will be your Aadhar number and your thumb print to validate your identity as owner of account linked to your Aadhar. There is currently pilot project going on and this will be rolled out on pan India basis very soon.