February 1, 2018
It was in February 2017 that the Indian payments industry under the guidance of the Reserve Bank and the Government of India launched Bharat QR, the world’s first interoperable Quick Response (QR) code acceptance solution. Being QR-led it allows for low-cost acceptance and highly secure push payments (consumer initiated) transaction. With increasingly affordable data price and the rapid adoption of smartphones, Bharat QR clearly allows everyone to be a digital payment-accepting merchant. However, it is the green part of it that deserves special mention.
The cost of a physical POS terminal ranges from Rs. 3,000 ($47) for a mobile POS to Rs. 12,000 ($188) for a GPRS device. The hardware, which is largely imported, generates significant e-waste and requires a constant supply of paper rolls and maintenance. For a country of more than 90 million retailers, this represents a significant cost not just in terms of import bill, but also the environmental cost of managing this e-/paper waste.
In contrast, Bharat QR:
is just a sticker (decal) pasted on the teller counter wall of the merchant;
doesn’t need any maintenance;
can be generated dynamically on the merchant’s mobile itself, removing the need for printing, which results in practically zero e-waste and paper loss.
On top of it, Bharat QR provides significant benefits to both consumers and merchants.
One of the key hindrances in the adoption of digital payments by small merchants with a monthly turnover less than Rs. 100,000 (~$1,570) is the monthly rental cost of a POS device. In comparison, Bharat QR provides low-cost acceptance, increasing the possibility of adoption – practically everyone can be a merchant with Bharat QR.
Greater digital cash flow opens the opportunity to obtain cash flow financing at attractive rates directly from financial institutions. Being a push payment solution, it incrementally reduces the transaction risk, helping banks in underwriting smaller merchants.
With the mobile phone becoming a focal point of daily life, Bharat QR provides an exciting possibility of consolidating both physical and online purchases. As a single interoperable standard, it enhances and catalyzes the consumer adoption journey, both from functional and actual user-led adoption points of view.
Additionally, being a push payment solution, it provides enhanced security to the consumer.
In both cases, the availability of digital transaction records reduces the need to opt for physical statements.
In the year between 10/16/2016 to 10/17/2017, RBI reported the following stats on merchant transactions:
Indians performed 1.32 billion transactions on credit cards;
3.35 billion transactions on debit cards;
All the above resulted in 93.5 million of paper rolls. On an average, each roll amounts to 50 prints (customer + merchant copy). If we were to include domestic prepaid transactions, this would amount to 100 million paper rolls every year.
This is the cost to the environment with just 3 million merchants (approx. 100% increase from 10/16/2016) on board. It isn’t difficult to imagine the impact and cost to the environment with 90 million merchants. Adding to that the fact that typical a POS machine’s shelf life is three to four years, the cost to environment gets even gloomier.
By providing the Bharat QR option to merchants, the government is taking responsible steps towards a greener and a more sustainable future. Currently, it takes $10 on average to acquire a merchant. In the past, the government has supported greener initiatives by providing a subsidy for their adoption. If the government were to provide a 50% subsidy on acquisition costs for new businesses with <$2 million turnover and 1% green input credit in GST to merchants with <$2 million turnover, it will undoubtedly lead to Bharat QR’s rapid adoption.
The Reserve bank of India, recognizing the importance of digital acceptance solutions (more secure, low cost, near-zero maintenance), provided an MDR advantage of 10 BPS (though it is not relevant now considering the government is absorbing the cost for next two years) over physical POS terminals.
In China, Kenya, and Sweden, the rapid adoption of digitization was supported by mobile-based methods of payment and acceptance. It’s high time we join the bandwagon towards such solutions as they come with a greener side to them, which is a highly appealing advantage.