29. Payments in — Utility, Telco, DTH

One more chapter on compulsory payments that we do on monthly or periodic basis. These are mandatory payments as non-payment will attract discontinuation of service or penalties.

• Utility: Electricity, Water, Gas connection e.g. BESCOM, BEST
• Telecom: Post-paid bills E.g. Vodafone
• DTH Service e.g. Tata Sky
• Broadband e.g. Hathaway

Here are the common requirements of these sectors

Requirement 1: Use Cases

• Active payments: User will make payment on merchant’s website or App
• Recurring Payments: Considering these are periodic payments, user may set-up mandate for recurring payments

Requirement 2: Channels

• Merchant’s website or App: By integrating with payment service providers
• Agent’s website/app/Counter: Through BBPS platform

Requirement 3: Payment Modes

• All payment modes: CC, DC, NB, UPI, containers, wallets etc.
• Practicality dictates which payment mode to be enabled. E.g. Considering small ticket size, EMI on cards is not useful for these sectors

Requirement 4: Charges

• Utility sector has lower charges (E.g. CC: ~1%, DC: RBI standard rate, NB/UPI: Flat Fee)
• Telco, DTH and Broadband merchants technically do not fall under Utility category (Merchant Category Code, MCC). But due to their size and bargaining power they enjoy Utility sector rates
• Utility sector is always configured in Surcharge model where user bears the charges (+GST)
• In case of Telco, DTH and Broadband, PG charges are in upfront deduction model where merchant bears the charges

Requirement 5: Settlement

• Standard settlement of T+2 days (again, possible to get T+1 day) for PG
• SI on Cards and e-Mandate will also have standard settlement of T+2 and T+1 day respectively
• For BBPS platform, settlement will be done on T+1 day
• Settlement amount will be gross (in case of surcharge) or net (in case of upfront deduction)

Requirement 6: Refunds

• Refunds are not frequent. Considering long term relationship, any additional amount paid is adjusted towards next cycle.
• If refund is really necessary then standard refund cycle will be followed
• Utility sector works in surcharge model. So when refund is marked (just in case) then customer will not get surcharge and GST amount back.

Payment channels and solutions:

Samples:

a. Vodafone — Payment gateway

b. Vodafone — Standing instruction

c. Payment on BBPS through Google Pay (UPI)

Important Points:

A. B2B Transactions:

Just like individuals, even companies subscribe to utility, telecom, broadband services (Example: Your company pays BESCOM bill every month). So B2B payments constitute big chunk of transactions Government, Telecom, Broadband sector (if not number of transactions but in terms of value). Apart from online payment gateway, NACH (paper based) plays important role in facilitating these payments.

B. Multiple Account Settlements:

Telecom companies operate in circles E.g. Karnataka Circle, Mumbai Cirle etc. If such model is followed then each circle will have different settlement account. To enable such model, separate MID has to be configured for each circles as each MID can have different settlement bank a/c

Alternatively, enable separate scheme code for each circle under the same MID and each scheme code will have different bank a/c

C. Success Rate:

How critical is the success rate for these type of merchant? Have you ever heard someone switching from Vodafone to Airtel because transaction failed?

These are mandatory payments so intent of payment is very high and even if transaction fails, customer will re-attempt again. Considering, failed transaction affects the customer’s experience so better success rate is important but not critical.

D. BBPS:

One of the most important channel for bill payment. We covered BBPS model in length earlier. Thanks to BBPS, customer can pay BESCOM, Vodafone or Tata Sky bills on third party Apps (PayTM, PhonePe, Google Pay or internet banking)… a one stop shop for all types bill payments and on top some of these payment providers give cash back and discounts as well… Number of transactions will continue to grow through BBPS platform.

Challenges:

Bill payments are complex… as you notice merchants have multiple channels for collections — Merchant’s website/App, Agent’s website/app and merchant’s own collection centres. Collecting payments is not a big problem compared to the reconciliation of payments collected through various channels. Think about it !!!