Bill payments units likely to find it tough to fit the bill

The RBI has started granting licences to Bharat Bill Payments Operating Units (BBPOU). Besides banks, eight non-banking entities have been granted in-principle approval.

But with three big corporates surrendering payments bank licence sensing difficulty in making profits, questions are being raised about the feasibility of bill payments units as well, since the margins in the business are extremely narrow. The National Payments Corporation of India, which is developing the backend infrastructure for BBPS, is planning to start the pilot by September, but it is yet to come out with the revenue model.

Questions have also been raised about the requirement of Rs 100 crore capital to start bill payments operations. RBI has said it wants only ‘serious players’ in the business, making many smaller players doing bill payments in smaller towns feel left out.

ET has, in consultation with industry experts, done its own calculations to see what it would take for a company to break even — 7,00,000 transactions every year. While the calculations have been done with various assumptions and rounding off for ease, the numbers and the figures are indicative of the challenges lying ahead for BBPOUs.