In the wake of Digital India initiative and emergence of cashless payments in the country, the Indian government has introduced BharatQR, an e-payment solution jointly launched by the National Payments Corporation of India (NPCI), MasterCard and Visa. The trio claim that this is another step in the direction of making India a less-cash economy.
How does BharatQR work?
Have you ever tried making a transaction by scanning the Quick Response (QR) code at the Point of Sale (PoS) via an m-wallet like Paytm or FreeCharge?? The merchant (who can be a shopkeeper, cab driver, etc.) displays a QR code while you are checking out. All you need to do is scan it in your m-wallet, enter the amount, acknowledge the confirmation and the payment is done.
BharatQR works in exactly the same manner, but with one crucial advantage. Instead of going through the tedious process of shuffling digital money between your m-wallet and bank amount, the billed amount will directly land in the merchant’s account. This money can be withdrawn using his MasterCard, RuPay, or a Visa card. So both the parties need not have a mobile wallet to send or receive money.
How will this solution bring relief?
With BharatQR, the customer wouldn’t have to worry about whether the card will be accepted at a particular store or not as the solution has been standardized across all card networks.
Second, no additional pain of carrying bulky physical wallets with multiple credit or debit cards.
Usually, bank’s official mobile app or an app linked to Visa, MasterCard, RuPay platforms, come with an inbuilt QR Code reader. One just needs to link his/her card or bank account with the mobile app as a one-time activity, scan the BharatQR code using the mobile app and make the payment.
Furthermore, BharatQR code will do away with the need of Point of Sale (PoS) swiping machines for merchants to accept digital payments. This means merchants will no longer have to bear the charge imposed by banks for using the PoS terminal.
But the payment mode is NOT without drawbacks!
A major disadvantage of using a QR code for payments is the code’s dependability on a smartphone. The whole concept of a QR code and its benefits is strictly based on its ability to be scanned by a mobile device. So if a consumer does not have a smartphone, then s/he will lose out.
Also, this is not exactly a boon for marketers. Since scanning a QR code is a one-way transaction, where only the customers receive information, marketers get no useful permission to re-engange with the customers for future marketing efforts.
Is this a blow to mobile wallet companies?
Mobile wallet companies like FreeCharge and Paytm have been working with QR codes for quite a while now. But unlike these wallets, merchants using BharatQR will no longer have limits on the amount of money that they can accept every month.
Also, the hassle of transferring money from the wallet to a bank account will be eliminated, doing away with the existing “closed-loop system”.
Another trend which has emerged lately is that the wallets in the market are tying up with their own set of merchants. For example, Paytm with Uber, Freecharge with Yatra and so on. This means a user has to install multiple wallets in order to become truly cashless. Since the wallets are not interoperable, one might end up having bunch of wallets.
And the security angle for wallets also remains to be settled. According to a report by Qualcomm, many Indian wallets are not protected by a hardware-based security layer. This makes them prone to software attacks and hacks. Umm, oops!
But banks are known to follow KYC norms for customer and merchant acquisition, which makes BharatQR a more secure payment method. Not to forget, there is no longer any security threat looming over OTP PINs or card details being compromised.
Noticeably, the pros of the QR code-based payment method outweigh that of an m-wallet significantly. So are m-wallets in trouble? Yes.
So far, about 15 banks including State Bank of India, Bank of India, Axis Bank, ICICI Bank, HDFC Bank, Yes Bank and Bank of Baroda are on board the government’s QR platform. And for users who do not have a smartphone or any phone, the government has revealed plans to have fingerprint scanner based PoS terminals to enable payments. Looks like India’s cash crunched state has indeed fueled the “revolution” of electronic payments in the country!