RBI’s new QR Code Rules
According to RBI’s latest rules, all QR codes have to be interoperable which means that the merchant might have a wallet/payment app of a certain payment app, it’s QR code will accept payments from all kinds of payment apps used by customers.
- To ease the friction and enable easy usage by customer and merchants thereby enabling online payments
- This move results in an open loop system rather than a closed loop system. In a closed loop system for example a merchant with a Paytm QR Code will only receive payments from Paytm app. An open loop system will reduce the probability of emergence of monopoly of a particular payment app.
Importance of QR Codes:
QR codes have been a game changer in China. China has almost gone digital in payments and a very large credit is being given to QR Codes.
QR codes make it easier for small merchants to accept payments and for customers to make payments. All that you need is a Mobile phone, data connection and a payment app.
If not QR codes, then merchants need Point of Sale (PoS) machines which are expensive for a large population of small merchants. Moreover, Banks need to issue cards to customers which also increases the cost.
Importance of reducing cash:
In India it’s important to reduce the usage of cash.
It will help in curbing black money.
Moreover, it can help increase reach of formal finance eg: if a small businessman like a vegetable vendor starts receiving much of its payments through mobile payment apps it will have enough data to be able to access formal sources of loans which it can’t right now because the vegetable vendor doesn’t have adequate papers to prove its credit worthiness.
Payment service apps cannot build closed loop systems now. They will have to compete on experience and service.
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