Bill Payments in India With BBPS

What are utility bills?

Remember when you used to use natural resources and utilities for free?

Oh, you may not be able to relate to this because you were most likely born in the era when you had to pay for your consumption. Worrying about due dates and payments has always been a familiar monthly activity for your parents or you.

And I’m sure you have been part of this scenario one way or the other.

Which brings me to the question, why hasn’t anyone thought of a better way of doing this? Well, some people did — as we call it the Jugaad- where our neighbourhood shops started the service of a person collecting bills and cash from the neighbourhoods and going to the payment counter every day. If it was running well then why do we need a better system? Let’s find out.

What is the need for a centralized utility bill payment system?

So everything works fine when you pay your utility bills in Cash?

Oh NO! Here is a quick list of just some of the problems we bump into:

1. Cash handling
2. Delayed settlements
3. Frauds
4. Speed of transaction etc…

Needless to say, this isn’t ideal. So a couple of companies decided to build a platform to unify this.

Let’s look at how things worked about a decade ago. BillDesk and Billjunction developed a platform called EBPP (Electronic Bill Presentment and Payment). One side of the platform is hooked up with utility companies, Telcos, Mutual funds, insurance etc.) and on the other hand agents like banks, third-party payment platforms are on-boarded. By integrating this platform, agents were able to extend the bill payment services to its customers. Just like every other neighbourhood store but now digitally!

A quick snap of how the system worked —

How Billdesk operates [Source]

Now, EBPP also came in with some limitations but it worked for a decade. Then why replace it?

Let’s look at some pitfalls:

1. Exclusivity in the platforms: If a Utility company on-boarded with Billdesk, then only agents of Billdesk will have access to the billing channels of that utility company. To get access to a wider audience, the company required another integration.
2. Duopoly: Over time, only two players BillDesk and Techprocess were operating in this market, which created a large barrier to entry for new-age companies
3. No Revenue sharing model: There wasn’t much incentive for agents who bring the customers

Structure of BBPS

To address these limitations and provide a level playing field, NPCI launched BBPS (Bharat Bill Payments System).

BBPS is a payment system set up to provide a seamless billing experience while providing for network growth and democratisation. It is run and operated by NPCI as one of its flagship payment systems and comes under the larger regulatory umbrella of RBI. You can learn more about the design thinking, purposes and vision from RBI here.

Let’s understand how BBPS is built first.

High-level summary of the system [Source]

Like any other platform, there are multiple components involved in BBPS as well,

1. Billers: These are the entities that are your service providers that now seek bill payments from you. These may be utility companies, Telecom companies, DTH, Insurance etc. but as per the latest updates from BBPS, you even start paying school fees and building maintenance. (read more here) e.g. Jio, Adani Electric, Tata Sky etc.
2. BBPCU: This is Bharat Bill Payment Central Unit i.e. NPCI that provides BBPS with a platform and facilitates the transactions and acts as a clearinghouse
3. BBPOU: This is Bharat Bill Payment Operating Unit, these are licensed entities and can be a bank and non-bank (payment service providers). Some operating units that are focused on adding billers are called BOU (Biller Operating Unit) and operating units that are focused on adding customers are COUs (Customer Operating Units) e.g. HDFC Bank, Airtel payments bank etc (Find entire list here)
4. Agents: Entities that work with COUs to access BBPS systems. Agents are the one who bring the customers to the platform through their app, web or collection counters (e.g. Paytm, Phonepe, Google Pay etc)

Now what sets BBPS apart from the older system and what are its advantages?

1. Due to integrated flow, different BBPOUs can access the biller’s information with ease i.e. multiple integrations are eliminated from the process
2. Agents who couldn’t get billers of their own can now access all billers and can focus on adding more agents.
3. Standard APIs for biller onboarding and agent integrations

Now we know the architecture of the BBPS. Let’s look at how your money flows into the system.

Transaction flow

Transaction flow of the BBPS transaction [Source]

On-us Transaction: Cases where the biller and agent belong to the same BBPOU. Here BBPOU confirms the payment status and moves 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 a clearinghouse to move money from agent to the relevant BBPOU (who in turn will settle funds with biller)

But hold on, BBPS is not just limited to transaction gateways, it’s a lot more than that. Let’s have a quick overview of what else is in the box.

Complaint Management: Standardised system to handle customer grievances for both On-us and Off-us transactions. These complaints are managed in a complaint management system.

BBPCU put them in a centralized system for both type of transactions

Customers can register complaints at:

• Any BBPOU portal or agent outlet/ branch
• Centralized BBCPU website

Two types of complaints are envisaged for BBPS:

• Transaction based complaint
• Service-based complaints

Dispute Management: To manage the disputes BBPS has a dispute management system also referred to as DMS. It facilitates BBPOUs to raise and resolve disputes relating to transactions that have passed through the BBPS system. The system is also open to consumers to raise disputes through payment providers. DMS has a process of arbitration where the BBPCU’s arbitration committee will deliver the final verdict. Different levels of DMS are as follows:

• Dispute initiation: Credit Adjustment / Refund
• Pre-arbitration
• Arbitration
• Good Faith

Clearing & Settlement: Multiple clearing & guaranteed settlements between different parties, standardised TAT

Standardisation: Standardisation of processes for entire BBPS ecosystem

Brand Connect: Single and trusted brand connect and BBPS Assurance

Who’s looking at the future:

The ride for BBPS has been fascinating with rapid growth in adoption, from the boost from API driven economy and new-age startups as well. Although RBI has approved a bunch of categories to be added, still there’s plenty of room to expand vertically and horizontally in the billing systems.

Imagine a world where you can pay school fees and college tuition fees via credit cards rather than the age-old Demand Drafts and cash. Going forward you should also be able to pay your home loan EMIs & maintenance bills on the same platform as you pay your utility bill.

A quick flashback on the growth:

Above numbers are sources for NPCI official statistics [click here]

The blasting growth of BBPS and payment infrastructure is here to stay, we will keep deep-diving into the systems for good.

Till then stay home and pay online!

About DICE

DICE (Digital India Collective for Empowerment) is an industry body focused on the Indian Digital Payments ecosystem. DICE takes an India first approach to creating collaborative industry-regulator relationships in the thriving ecosystem. Follow us at @indiadice on Twitter.