Incentivise QR code transactions to push digitisation: RBI panel tells govt

The government must provide incentives to popularise QR (Quick Response) code transactions, according to Reserve Bank of India (RBI) committee report . The RBI committee under the chairmanship of DB Phatak (Professor Emeritus, IIT-Bombay) made a case for phasing out proprietary closed-loop QR codes in favour of open interoperable standards.

With the growing penetration of smartphones in India, QR code-based payments present the most cost-effective way of expanding the digital footprint, it says. "According to a report by telecom equipment maker Ericsson, mobile subscribers in India may touch 1.4 bn by 2020. The growing smartphone user base in India indicates an immense growth opportunity for digital payments," it adds.

The biggest hindrance faced by prospective merchants and payment aggregators and banks is a delay in the onboarding process due to KYC formalities, document collection, verification and updation, the report says. "There should be a clear plan to phase out proprietary, closed-loop QR codes in favour of open, interoperable standards," it maintains.

The committee said implementation of the recommendations needs action from several agencies. All networks in collaboration with banks and TPAPs can come out with guidelines for issuance app standardisation to deliver a consistent and seamless customer experience, it said.

The RBI may also issue the guidelines for revised KYC process to ensure faster merchant onboarding, it said. New features such as 'save QR', 'invoice relay through dynamic QR', 'setting up e-mandate' etc. for future/repeat payments may also be allowed, it added.

The government should also allow a lower controlled interchange instead of zero MDR on QR code/UPI/RuPay debit card transactions, as well as offer tax incentives to merchants allowing electronic transactions.

Why adopt QR codes

• The panel says India still incurs a large expenditure in printing and transportation of currency notes. Digital payments provide an opportunity to reduce these costs.
• As compared to other modes of payments, QR codes present a viable and cost-effective option.
• People can conveniently pay bills, shop, schedule transactions and manage their finances using their smartphones at a time and place of their choice.
• The report suggests interoperability of payment systems could benefit all participants in the ecosystem and can produce cost-efficiencies and enable superior risk management.

• 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 named Denso Wave in the 1990s invented the QR Code.
• In India, QR Code Payment Systems broadly support three different types of QR Code payments, including Bharat QR, UPI QR and Proprietary QR.

Also read: Govt to rollout tax benefits on QR-code based UPI payment

With agency inputs