India’s Digital Payments Push: Incentives on BHIM

By Pritesh Samuel

In line with the government’s digital push, two cashback schemes – associated with the Bharat Interface for Money (BHIM) app – are expected to be released in the coming month. The BHIM app is available on both android and iOS platforms, and has recorded over 17 million downloads.

BHIM app: Quick primer

BHIM integrates the United Payments Interface (UPI) based services offered by all banks on a single platform.

• Users can receive and send money and settle bills using a vendor’s Quick Response (QR) code.
• Customers can check their bank balance on the app. All you need is a smartphone, a bank account, and a four-digit passcode at the time of registering.
• At the moment, around 37 banks are integrated into the app, including public and private such as State Bank of India, HDFC, ICICI, Kotak Mahindra, and Standard Chartered. All public sector banks are eventually expected to be on the app.
• Users can also send money to banks not on the app, using an IFSC code and an account number.

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Government incentives on the BHIM app

Cashback: To avail of this scheme, users have to download the BHIM app and create a UPI address. Following that, users will need to link their phone number and address along with their bank account. Once this is done, any transaction done via the app will result in the user getting cashbacks. However, this scheme will only be available for merchants.

Referral bonus scheme: A referral code is given to the user who can use the code to refer others. If another user downloads the app using the referral code, the original user gets the referral bonus.

The above two schemes were announced by Finance Minister Arun Jaitley as part of India’s 2017 budget. The government has also integrated Aadhaar based transactions with BHIM.

The BHIM app provides thee modes of payment: through Aadhaar, a user’s mobile number/virtual payment address, and bank account. BHIM has been developed by the National Payments Corporation of India.

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Takeaways

The incentives underline the government’s continued push towards building a cashless economy. The BHIM app has the potential to replace individual apps from banks, wallets, and other fintech startups, and will boost the growth of digital payments in the country. A recent study done by Google and the Boston Consultancy Group (BCG) forecasts that digital payments will contribute towards 15 percent of India’s GDP by 2020.

The BHIM app is among several others, which the government has launched including Aadhaar pay, DigiLocker, BharatQR code, and eTaal. The adoption of digital services will reduce costs of running India’s cash-based economy. Downloads of such apps have already witnessed a temporary boost following the government’s November 2016 demonetization move. The government hopes to make this transition more habitual by incentivizing the usage of digital alternatives and penalizing large cash transactions. Such moves will also go a long way in promoting transparency, retracting the parallel ‘black market’ economy, and ultimately, reducing the country’s excessive and costly dependence on cash.

Needless to say, India must ramp up its internet and digital infrastructure, and ensure a progressive regulatory climate to effectively meet these ‘cashless’ goals.

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