Bharat Bill Payment System: How can it benefit consumers?

Rajiv Raj Creditvidya.comThe Reserve Bank of India’s recent draft of Bharat Bill Payment System (BBPS)—a system wherein all billers will list their bills in one window, is a welcome move. It is the right step in the 'consumer-facing approach' which points out at the regulator’s focus on coming out with measures that benefit the last customer in a value chain. BBPS not only makes bill payments easy but also opens an opportunity to create a database of payment tracking which further enables new credit products to cater to consumer needs.  For beginners it makes sense to understand how BBPS work. It all begins with individuals paying bills to multiple service providers – be it an electricity bill, water bill, telephone bill. Each of these billers offers multiple payment mechanisms. Some offer point of services in the form of branch offices or collection centers. Some offer an online payment facility and some even collect cash from customer's home or office. There are also some entities which collect payments from customers for multiple billers. The Reserve Bank of India intends to put all these bill payments in order.Under BBPS, all bills will be listed in one window. Some of the existing players that act as a collection entity for multiple billers will be registered as Bharat Bill Payment Operating Units. The individuals will pay their bills using modes such as credit cards, debit cards and cash in one window. In case of internet banking and card payments, the customer will see the money going to one escrow account from his account. Operating Units (OU) or BBPS then will pay each biller from that account. These bill payments will also be centrally tracked. BBPS can be a more vibrant mechanism if it goes beyond just bill payment. The BBPS should work in sync with the credit bureaus. The credit bureaus have been capturing the data pertaining to loan repayments by borrowers. Now it is high time that the timely payment of bill should also be tracked while ascertaining the credit score, popularly known as CIBIL score. This can be achieved with the help of necessary changes in the infrastructure and legal and regulatory framework. Such a system will help banks identity more creditworthy customers over 'not-so-creditworthy' ones.Today there are many first-time borrowers for whom credit score stands at zero and banks find it difficult to take a lending decision. Data from BBPS can help banks take a more informed decision. Banks can also come out with some lending practices and loan products mainly dependent on the BBPS data. For example, a bank may lend a sum of Rs 50000 to someone who is servicing bills of Rs 5000 each month for say 24 months in a row. The possibility of default by a person who is paying his bills on time is relatively low as compared with one who is not able to pay his bills on time. Such product innovations will create a win-win situation for both customers and the banks. What is timely about this draft is it has come at a time the Prime Minister’s Jan Dhan Yojana has been launched. The scheme aims at opening of new 7.5 crore bank accounts. In most cases these are going to be first-time customers for banks. If these individuals use their bank accounts to tap into BBPS to pay their household bills, it will be a much bigger database than the database of credit bureaus. Each household in India need not necessarily have a loan from a bank but yes, it does pay multiple bills each month. BBPS can be a big game changer if credit bureaus and banks are allowed to use the information to ascertain the credit scores and the creditworthiness of individuals.Customers too stand to benefit the most if they keep paying their bills on time. Thus they become more creditworthy and can negotiate better terms while borrowing. BBPS also has provision for grievances readdressed system. This will also ensure quick dispute resolution for the customers. BBPS should also provide data pertaining to disputes raised and its resolution so that the customers can rate the biller's quality of service.So, start repaying your loans on time and be prudent with your bill payments since it is going to be a transparent system that would reward individuals who are paying their financial liabilities on time.