ET Explainer: Issues with credit card bill payments through third-party apps

The Reserve Bank of India (RBI) has tightened the regulations for credit card bill payments, mandating that all banks process these transactions through the centralised Bharat Bill Payment System (BBPS), starting July 1.

Currently, 12 banks are operational on BBPS for credit card bill payments, with major players like HDFC Bank, Axis Bank, Yes Bank, IDFC First Bank still in various stages of integration.

ET explains the significance of this move.


Why does the RBI want all forms of bills to be paid via BBPS?

BBPS, developed by the National Payments Corporation of India (NPCI), is a unified platform for all forms of bill payments across India. The RBI wants to make BBPS the default bill payment network for the entire country and bypass individual agreements between billers, banks and fintechs.

With credit card bill payments, RBI's directive aims to enhance security and control over these transactions to reduce frauds and bring in standardised grievance redressal. Payments via these apps are typically settled through IMPS, or directly with the bank. The regulator wants all such transactions to flow through the centralised BBPS network.

What changes now?

Currently, consumers can pay their credit card bills through auto debit facility, net banking (NEFT or IMPS), or third-party apps. From a consumer perspective nothing much changes; only that all these credit card payments will be routed through BBPS in the backend. The problem is for banks who are not live on BBPS yet.

The likes of Cred, Amazon Pay and PhonePe continue to offer these services for those banks through individual payment settlement channels. Once lenders like Axis, HDFC Bank go live on BBPS, the backend channels will change with hardly any impact on consumers.

Why are banks slow to integrate with BBPS?

Banks want BBPS to be another settlement mode and not become the only settlement channel. The payments industry, through the Payments Council of India, had raised this concern with the central bank and asked for an extension, but that never came through.

Also, in many cases these large banks have been slow to onboard new payment channels. For instance, when UPI was launched, HDFC Bank and State Bank of India were not ‘live’ among the first lot. Interestingly, smaller lenders AU Small Finance Bank, Federal Bank went live on BBPS in the first batch.

What changes for third-party apps?

Apps like PhonePe, Amazon Pay and Cred are already integrated with BBPS, so they can process these transactions smoothly. But this will impact their direct settlement arrangements with banks. There could be an impact on their margins as well. BBPS will have standard commission norms which might take away certain charges levied by these fintechs. Also, there will be a loss of exclusivity since almost every fintech app which is live on BBPS will be able to offer credit card bill payments to their consumers. Cred built its entire business on these payments, using it as a hook for customer onboarding. That avenue closes for any new startup trying this route.