EBPP -> BBPS

We all pay one or other bill; electricity, mobile, DTH, insurance premiums, credit card bills etc. We pay through various channels (e.g.: website/App, bank account, collection counter etc.) and with preferred payment instruments (e.g. cash, cards, wallets etc.). To give such flexibility (choice of channel and payment mode) to customers, a biller enables multiple channels for bill payment.

Example: BESCOM has various channels to collect bill payments

• BESCOM website
• BESCOM collection counter
• Third party Apps/website: PhonePe, Google Pay, BillDesk website etc.
• Registering BESCOM as biller in your bank account

Bill Payment Channels — HDFC Bank (Top), Billdesk Site (Left), PhonePe (Right)

Of the mentioned channels, last 2 channels are of our interest as it is interesting to know how a user can pay an utility company’s bill on App of third party service provider or through bank account. This is where BBPS (Bharat Bill Payment System) comes into picture…

Before we jump into BBPS, let us understand its evolution:

More than a decade ago, BillDesk and BillJunction (TechProcess) developed bill payment platform called EBPP (Electronic Bill Presentment and Payment) platform. On one hand billers (utility companies, Telco, insurance, MF, card companies) are integrated to the platform and on the other hand agents (e.g. third party Apps, banks etc.) are on-boarded. By integrating with EBPP platform, agents can extend bill payment services to its customers.

Schematic of EBPP Platform

Participants of EBPP Platform:

A. EBPP Provider: Companies (Billdesk/TechProcess) that provide bill payment platform.

B. Billers: Entity that intends to collect payments from users. A biller can be Telco (e.g. Airtel), utility company (e.g. BESCOM), Insurance company (e.g. LIC) or Credit card issuer (e.g. Amex)

There are two type of billers

• Biller with validation: These billers would require customer to do one time validation of bill credentials. With registration, agent can fetch the bill and show it to customer (This is how every month you see your BESCOM bill in your HDFC net-banking account). Such billers may have few conditions w.r.t. bill payment such as: (a) do not allow payment after due date (b) late payment charges © no partial payments
• Biller without validation: Such billers allow bill payment without validation (E.g. Vodafone). Such billers do not have conditions w.r.t. due date, penalty or partial payments.

C. Agents: Entities that integrate with EBPP platform and bring customers to the platform for bill payment. Example: PhonePe, Google Pay, HDFC Bank or Bangalore One. These agents enable bill payment through online payment gateway, wallet, UPI, bank account or cash.

Transaction Flow of EBPP

Customer selects the bill on Agent’s website/App and makes payment with preferred mode (card, NB or wallet). EBPP provider then does payment posting to the biller and return the status of bill payment that is communicated to customer via Agent.

Fund Movement of EBPP

EBPP provider shared payment report with agent on T+1 day and agent has to transfer the amount to EBPP provider (nodal account) and EBPP provider will deposit funds to Biller’s account on T+1 day

Commercial / Revenue Model:

EBPP provider (aggregator): For every bill collected through the platform, EBPP provider receives fixed fee (Rs.0 — Rs.5) from the biller. This arrangement is finalised when biller is on-boarded (typically through RFP process).

Agents: EBPP Provider shares part of the revenue earned from biller (say 50% or 60% of revenue). But agents have to bear the collection cost. If it is cash then cash management charges (if any) and in case of payment gateway it will be transaction charges (or MDR)

• Agent cannot charge extra fees above bill amount from user (most of billers do not allow surcharging model on this platform)
• Agents may not get lower transaction rates (or MDR) as agents themselves are not utility companies (Utility companies have lower MDR compared to other merchants)
• Agents run cash back / discount programs to attract users so that also adds to the cost

Why Agents don’t make money in EBPP

It is very simple, MDR (cost) is in percentage of transaction value but revenue is in flat fee. So agents don’t make much money/profit. At present, there are no charges on UPI and debit card transactions below Rs.2000 so it looks profitable but if you bring in credit card also into play then margins go into negative.

If EBPP was working fine for decade then why replace it?

EBPP was not an efficient model and below are some of the limitations

• A biller on-boarded with BillDesk will be available only for agents of BillDesk. If a biller is exclusively available with TechProcess then agent has to do another integration will TechProcess’ EBPP platform.
• Over the period of time, BillDesk and TechProcess created monopoly in bill payment space so many late entrants couldn’t access this sector.
• There is not much incentive for agents who actually bring the customers (have to rely on meagre revenue sharing from EBPP providers)

To address these limitation and provide level playing field, NPCI launched BBPS.

Schematic for BBPS

Participants of BBPS Platform:

• Billers: Entities that intends to collect bill payments. These may be utility companies, Telco, DTH, Insurance companies etc.
• BBPCU: Bharat Bill Payment Control Unit i.e. NPCI that provides BBPS platform and facilitate off-us transactions and acts as clearing house.
• BBPOU: Bharat Bill Payment Operating Unit, these are licensed entities and can be bank and non-bank (payment service providers). Some Operating Units (OUs) that are focused on adding billers are called BOU (Biller Operating Unit) and Operating Units that are focused on adding agents (customers) are licensed as COU (Customer Operating Units)
• Agents: Entities that work with COUs to access BBPS system. Agents are the one who bring the customers (users) to the platform through their App, website or collection counters.

Advantages of BBPS:

• With off-us flow, agents of BBPOU A can access biller of BBPOU B without doing multiple integrations
• Aggregators who couldn’t get biller of their own can now access all billers and can focus on adding more agents
• Standard APIs for biller on-boarding and agent integrations

Transaction Flow of BBPS:

On-Us transaction: Cases where biller and agent belongs to same BBPOU. Here BBPOU confirms the payment status and move the funds from agent to biller

Off-Us transaction: Cases where biller and agent are from different BBPOU. Here BBPCU facilitate the bill payment and act as clearing house to move money from agent to the relevant BBPOU (who in turn will settle funds with biller)

Commercial Model:

BBPCU: Rs.0.20 per bill paid through BBPS (for utility sector). This rate varies for different sectors

COU: Entities that are registered as COU receives Rs.2.50 for every bill paid (online) and Rs.5 — Rs.25 per bill (if paid offline, cash)

BOU: Flat fee per bill paid (typically agreed during biller on-boarding). If you do simple maths then BOU has to charge the biller anything above Rs.2.70 to make profit but generally this won’t happen.

Agents: COU will have revenue sharing arrangement with agents (50:50, 60:40 etc.). Agent has to bear the cost of collection (e.g. cash management fees or PG charges)

Success of BBPS

The idea is to bring all major sectors/verticals under BBPS platform. At present, Utility companies (electricity, water, gas), telco, DTH are under BBPS. But eventually, insurance, mutual funds, government taxes, college fees and even e-commerce will come under BBPS.

Transactions are increasing multiple folds every month on BBPS so should we conclude that BBPS model was successful? One of the purposes of BBPS was to create level playing field for all BBPOUs but considering BillDesk is still a dominant BBPOU… So wonder whether BBPS was successful on that count… think about it.