RBI panel pitches for incentives to promote usage of QR code transactions

With a view to promote less cash economy, the government should provide incentives to popularise usage of QR (Quick Response) code transactions among consumers, a report of the Reserve Bank of India (RBI) said on Wednesday.

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 — Bharat QR, UPI QR, and Proprietary QR.

Besides other suggestions, the RBI committee on analysis of QR (Quick Response) code, under chairmanship of D B Phatak (Professor Emeritus, IIT-Bombay), has also made a case for phasing out proprietary closed loop QR codes in favour of open interoperable standards.

‘Government/RBI should allow a controlled interchange instead of zero MDR on QR code/UPI/RuPay Debit card transactions, as well as give tax incentives to merchants who accept payments through electronic mode.

‘Further, government should provide incentive schemes to ensure popularity of QR code transactions among consumers in the country,’ said the ‘Committee for Analysis of QR Code’ report.

Earlier, a committee on deepening digital payments, constituted by RBI under the chairmanship of Nandan Nilekani, non-executive chairman, Infosys, had said ‘Market forces must result in transaction pricing that creates a viable ecosystem. Regulator should adjust the interchange rate and let the market compete on MDR (Merchant Discount Rate) ultimately growing acceptance ecosystem rather than inhibiting it.’ Observing that proprietary, closed loop QR codes are a hindrance to an open, interoperable payments ecosystem, the report, placed on RBI website on Wednesday, said, ‘There should be a clear plan to phase out proprietary, closed loop QR codes in favour of open, interoperable standards.’ The committee has also suggested that regulator may accept the existing bank account as a valid KYC (know your customer) for faster merchant onboarding.

For all purposes, the merchant acquiring bank (or any regulated entity as permitted by the regulator for merchant acquiring activity) shall be responsible for the KYC of the merchant, it said.

The merchant acquiring bank/regulated entity depending on the value and volume presented by the merchant, may strengthen the KYC of the merchant, it added.

The report further said considering the scale of the country, multiple interoperable QR codes should drive the acceptance infrastructure in coming years.

‘A common QR code or single QR across all payment instruments will create greater concentration risk. RBI should encourage multiple interoperable QR codes like Bharat QR and UPI QR to enable faster on-boarding of all types of merchants for digital payments,’ it said.

As per the report submitted to the RBI, the paper based QR code is very cost effective (sticker) and does not need any maintenance.

In due course, QR codes will migrate to the dynamic version. The payer’s software can handle multiple interoperable QR codes, allowing the acceptance infrastructure to evolve, it noted.

Commenting on the report, Sachin Chabbra, founder of Mumbai-headquartered B2B Grocery e-commerce company Peelworks said one of the exciting capabilities that QR code could bring about is to ease the compliance load.

‘We need this product scaled up rapidly if we truly want to unlock the potential of corner stores and put them back on the path of growth,’ he said.

Vishwas Patel, Chairman – Payments Council Of India and a member of the committee, said interoperability of payment systems benefit all participants in the ecosystem as well produce cost efficiencies and enable superior risk management.

‘Therefore the committee has suggested that RBI should only encourage Bharat QR and UPI QR or any other interoperable QR that may be developed in future,’ Patel said.

The report said post demonetisation, the acceptance infrastructure for QR codes has seen tremendous growth. As a result, QR based payments are rapidly increasing.

One can simply scan a QR code to pay utility bills, fuel, grocery, food, travel, and several other categories.

The Reserve Bank has invited comments/suggestions on the report from all stakeholders and members of public by August 10, 2020.