As a result of the partnership, the QR (quick response) code-based payment solution 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, will be formally launched on 20th of February 2017 in Mumbai, bloombergquint.com reports.
It becomes the second major digital payment option being promoted by the government after the Unified Payments Interface (UPI) based BHIM app, the source cites. Both are being pitched as an alternative to cash following the 8th of November 2016 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.
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 first. 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, the source cites.
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