Paying credit card bills has become a bit cumbersome from July 1, 2024. How? Before we get there, how do you pay your credit card bills?
I do not know about you, but I pay my credit card bills using Paytm app. To pay the credit card bill, I simply open the Paytm app, select the credit card for payment, and pay directly from my linked bank account. No need to log into the website/app of the card issuing app OR into my savings bank account. I have added all my credit cards in the Paytm app, and my savings bank account too for UPI payments. Easy and convenient.
But this convenience may go away, at least for some time.
What Changes Now?
The Reserve Bank has mandated that all the credit card bill payments from third-party apps (such as Paytm and PhonePe) shall be routed through Bharat Bill Payment System (BBPS).
Please understand that this restriction is on payment of credit card dues and NOT on the payment of subscriptions or utility bills through your credit cards. Hence, this decision only affects how you pay your credit card bills.
Hence, if your credit card issuing bank has not yet joined BBPS, you will not be able to make credit card payments through third-party banks.
As on July 1, 2024, only 12 banks are live on BBPS.
- State Bank of India
- IndusInd Bank
- Kotak Mahindra Bank
- AU Small Finance Bank
- IDBI Bank
- Canara Bank
- Federal Bank
- Bank of Baroda
- ICICI Bank
- Punjab National Bank
- Union Bank
- Saraswat Bank
If you own credit cards from one of these banks, you will not face any problems. However, if your card-issuing bank is not in this list, you will not be able to pay credit card bills through third-party apps such as Paytm until your card issuing bank joins BBPS.
However, that does not mean you will not be able to pay your card bills at all. You can still use the conventional methods such as netbanking, UPI, NEFT, and IMPS from your savings bank account.
In any case, you can expect this list of banks to swell very soon.
What is BBPS (Bharat Bill Payment System)?
BBPS is an integrated and interoperable Bill payment system and is managed by NPCI. BBPS connects billers and customers through Bharat Bill Pay partner app.
I am writing this from the point of view of a customer interested in digital bill payments. This partner app could be Paytm, PhonePe, or even your mobile banking app. The partner app can fetch bills from the system and send payment reminders. Makes life easy for customers.
In absence of such a system, every bank/payment app will have to partner with every biller for bill payments. For instance, if ICICI Bank has not tied up with the state electricity board in say Meghalaya, you won’t be able to easily pay electricity bills in Meghalaya from your iMobile app. Technically, you could still use NEFT/IMPS/RTGS transfer to a virtual account number (given by the biller) but it is cumbersome. OR you will have to use discom’s website to make the payment through Netbanking/credit card/UPI.
With BBPS in play, life becomes easy for both billers and banks.
You can expect all billers to sign up with BBPS. Your bank/payment app just needs to get onboard BBPS.
With a BBPS partner customer app in your mobile, you can make bill payments or set up subscriptions with all these billers using any payment mode (credit card/debit card/net banking/IMPS/UPI/Wallet).
I reproduce 2 charts from a presentation by BBPS. Here is the link to RBI Master Directions on Bharat Bill Payment System.
Why Would the Banks Not Join BBPS?
There could be multiple reasons.
- Infrastructure cost
- The banks may have built extensive tie-ups with billers and may not feel the need to join BBPS.
- If a third-party app such as Paytm is on BBPS and a customer can pay utility bills/subscription amounts through any payment mode, the customer can always use the credit card (even from banks not on BBPS) to make bill payment. Hence, there is no strong reason for the banks to join BBPS.
- The issuing banks may want their customers to pay card bills from their apps only. This way, the customer will engage with a bank-owned platform. We have already seen what Paytm/PhonePe/GPay have done to mobile banking apps offered by banks.
Why Does RBI Want to Route Credit Card Bills through BBPS?
RBI wants to promote an alternative merchant payments, billing, and subscription payments system, which is not dependent on foreign card networks such as Visa and Mastercard. And rightly so.
You just need to connect the dots. UPI. RuPay. RuPay cards on UPI. Note Visa and Mastercard are still now allowed on UPI.
Hence, this is a nudge to the banks to get onboard BBPS.
Additionally, when credit card bill payments are routed through BBPS, RBI gets better information about credit card spending data.
With my limited understanding, I think the success of UPI and BBPS also fosters competition in the fintech space. Keeps banks on their toes as the banks know that they cannot be too far behind in technology. They have already seen how the success of UPI has commoditized the core banking transactional services and even products, at least for retail customers. You can do all basic transactions from these new age apps (Paytm, PhonePe, GPay). You may not have to log into the mobile banking app for days and weeks together.
How Was Paytm Allowing Card Bill Payments for Banks Not Live on BBPS?
If the bank was live on BBPS, the payment could be settled through BBPS.
If the card-issuing bank was not live on BBPS, such third-party apps could transfer your payment to the card-issuing bank through IMPS/UPI. From July 1, 2024, this mode is not allowed. The payment must be routed through BBPS.
For you to restart making card payments from Paytm or PhonePe, you will have to wait until the bank goes live on BBPS.