Fintech startups like Cred, PhonePe, BillDesk, and Inbeam Avenues are preparing for significant disruptions due to a new regulation starting on July 1 mandating that credit card bill payments go through a centralised billing network.
However, major Indian card issuers, such as HDFC Bank, which has 20 million credit cards; ICICI Bank, which has 17 million; and Axis Bank, which has 14 million, have yet to activate the Bharat Bill Payment System (BBPS), as reported by the Economic Times.
This situation means that platforms like PhonePe and Cred, which are members of BBPS, will not be able to process credit card dues for these large banks and other non-compliant lenders. Industry insiders fear that this could lead to a substantial decrease in transaction volumes, according to executives speaking with ET.
The Reserve Bank of India (RBI) mandated that all credit card payments transition to BBPS after June 30.
Speaking, Yashwant Lodha, co-founder of PayNearby, said, “The recent directive by the RBI to process all credit card bill payments through the Bharat Bill Payment System (BBPS) is a significant move towards enhancing the efficiency and security of the payment ecosystem.”
“BBPS, being a robust and well-integrated network with thousands of billers and the presence of all major banks, offers a seamless and standardized experience for customers. This initiative aims to lower integration costs for issuers, improve oversight of collection points, and establish a uniform grievance redressal mechanism,” added Lodha.
Only eight out of 34 banks authorized to issue credit cards have activated bill payments on this central bank-backed network. These include major players like SBI Card, BoB Card, Kotak Mahindra Bank, Federal Bank, and IndusInd Bank.
“A few banks have yet to comply, likely due to their existing investments in direct connectivity with various channels, viewing BBPS as an additional integration layer,” said Lodha, regarding what could have caused the delay.
The CEO of a leading payment firm highlighted that the payments industry has requested a 90-day extension to the deadline and is awaiting a decision from the regulator. The Payments Council of India has formally petitioned the RBI on this matter, though a decision has yet to be announced.
“While it is challenging to forecast the next steps on extension, we are confident that the regulator will prioritize customer interests, as it has consistently done in the past,” explained Lodha.
BBPS, driven by the National Payments Corporation of India (NPCI) under RBI oversight, offers various payment categories, from utilities to insurance premiums, mutual funds, and now credit cards.
Currently, credit card users can pay their bills through netbanking or auto-debit mandates, but third-party applications will only be phased out if an extension is granted.
NPCI’s Bharat Billpay (NBBL) is discussing with central banks about onboarding them onto BBPS, a process that could take several months. Meanwhile, there is speculation that the regulator might extend the deadline to mitigate potential disruptions, with an official decision anticipated later this month.
Data from NBBL indicates that credit card payments constitute a small fraction (1.5%) of total BBPS transactions, dominated by utilities and toll payments via Fastag. Despite the significant growth in credit card issuance and usage in recent years, the volume of bills paid through BBPS remains relatively low, with vast potential for growth once central private banks fully adopt BBPS.
