RBI set to change India's payments picture with new QR code rules
QR code-based payments, where you point your phone at a sticker and see a payment go through instantly, are thought of as the lowest cost option to encourage merchants to accept digital payments.
QR code-based payments, where you point your phone at a sticker and see payment go through instantly, are thought of as the lowest cost option to encourage merchants to accept digital payments. There is no upfront cost to be paid, like in the case of a point-of-sale machine. The merchant discount rate charged is lower than other payment options. And now, after the Reserve Bank of India’s latest rules, the same QR code can across multiple payment applications. Last week, the RBI mandated a move towards interoperable QR codes. Bharat QR and UPI QR—the two interoperable codes available—will continue, any proprietary codes will need to be phased out by March 2022, and any new QR codes introduced will need to be accepted across payment options.
The Reserve Bank on October 22 barred Payment System Operators (PSOs) from launching any new proprietary QR code for payment transactions and asked them to switch to at least one interoperable QR code so that the same QR code can across multiple payment applications.
RBI’s latest directive is to improve the digital payment infrastructure in the country.
QR codes are two-dimensional machine-readable barcodes, which are increasingly used to facilitate mobile payments at the point-of-sale. QR codes can store a large amount of information. A Japanese company, Denso Wave, invented the QR code in the 1990s.
A closed-loop QR system only accepts payments from the mobile application of its deployer. This is against the principle of interoperability agreement between third-party payment applications and banks that governs the Unified Payment Interface (UPI) ecosystem. Furthermore, payment companies and banks are now also using QR technology for the acceptance of contactless card payments using Bharat QR, which is a mutually derived solution among NPCI, Visa, and Mastercard to pay bills without sharing credentials to merchants.
UPI QR and Bharat QR shall continue as at present, the central bank said in a notification. "PSOs that use proprietary QR codes shall shift to one or more interoperable QR codes; the process of migration shall be completed by March 31, 2022," it added.
These decisions, the RBI said, are expected to reinforce the acceptance infrastructure, provide better user convenience due to interoperability, and enhance system efficiency. In India, QR Code Payment Systems broadly supports three different types of QR code payments -- Bharat QR, UPI QR, and Proprietary QR.
