A committee constituted by the Reserve Bank of India to review quick response (QR) code has recommended a phase-out of closed-loop QR codes, introduction of interoperable codes across multiple payment instruments and the use of a nominal amount of interchange fee instead of zero MDR (merchant discount rate) on QR code-based payments.
The report also recommends the use of a single QR code across all payment instruments by leveraging Bharat QR and UPI (unified payments interface) QR, both developed by the National Payments Corporation of India (NPCI) for faster on-boarding of merchants for digital payments.
QR codes typically allow users to scan the pattern and make payments through wallets or linked bank accounts. Soon after demonetisation in 2016, digital payments firm Paytm aggressively acquired merchants for its closed-loop QR code-based payments. It launched ‘all-in-one’ QR codes for merchants in January this year to accept payments across multiple channels including UPI (unified payments interface), other wallets and RuPay cards.
The report suggests multiple UPI IDs could be allowed for a single recipient to ensure if one of the payment service providers for the merchant is down, an alternate ID can be used to make the payment.
Stating that centre’s move to reduce merchant discount rate to zero in the Budget 2019 has had a ‘negative impact’ on the payment ecosystem, the report suggested that, “Government should allow a lower controlled interchange instead of zero MDR on QR code / UPI/ RuPay Debit card transactions, as well as give tax incentives to merchants who accept electronic transactions.”
The committee also proposed incentivising customers to opt for QR code based payments over other modes of digital payments.
“QR codes bring a significant advantage for informal establishments with low technology adoption. The committee has thus also suggested that the merchant should be allowed to be on-boarded with the acquiring bank/regulated entity with a simple online agreement signing and a valid savings/current bank account where the transaction settlements will be made,” Vishwas Patel, chairman of Payments Council of India said.
The recommendations made by the committee on ‘furthering digital payments’ has been submitted to the RBI for further procedure.
The committee, constituted by RBI on December 23, held three meetings and sought feedback from industry partners including Paytm, PhonePe, Google Pay, Mobikwik, Amazon Pay, payment network providers Visa and Mastercard, NPCI as well as iSpirt and indian Banks Association.
The committee chaired by Dr DB Phatak of IIT Bombay also included Dilip Asbe, CEO of National Payments Corporation of India; Vishwas Patel, chairman of Payments Council of India; Arvind Kumar, director general of STQC at Ministry of Electronics and Information Technology (MeitY); Sunil Mehta, chief executive of Indian Banks Association and Dr AS Ramasastri, director of Institute for Development of Research in Banking Technology.