The Unified Payment Interface (UPI) will soon have a new feature called “single block, multiple debits”. This will promote more online payments for e-commerce transactions; right now, at least 50% of the payments are in cash. Shobhana Subramanian explains why the SBMD facility is likely to become popular.
How the SBMD makes the UPI more useful
Single Block, Mutiple Debits (SBMD) is similar to what we know as pre-authorisation in the context of credit cards. For instance, when we check into a hotel, a certain amount from our credit cards is blocked for the billing.
In the UPI context, auto-pay exists for some categories of payments, but doesn’t for a host of use-cases, including e-commerce transactions. Think of SBMD as an escrow account where a certain amount is parked for payments, facilitated by UPI, to a merchant. It is only a debit facility, and builds newer use-cases for UPI. The transaction can be done, much like it is done today on a smartphone via GPay, PhonePe, etc.
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How SBMD gives users more confidence
The share of cash-on-delivery (CoD) transactions today is as high as 50% in the e-commerce space, as people are still not comfortable with pre-pay modes. With SBMD on UPI, a user can block a certain amount , say, for the payments for her purchases from Amazon. Assume this block is of Rs 5,000. So, when she purchases something on Amazon and the delivery is executed, the payment gets executed through UPI under the SBMD mechanism.
Experts say currently there is no option to pay with UPI for an e-commerce CoD. Many who purchase from e-commerce platforms may not be confident about delivery till it is executed and hence wouldn’t want to pay in advance. SBMD for UPI offers them a cashless way of paying on delivery.
Impact on credit card ecosystem
This could be a game-changer for credit cards. Experts believe that while currently, the credit card acceptance is limited to just 6-7 million merchants in India, once the credit-cards via UPI (through QR) takes off, this could go up to over 20 million merchants.
Currently, credit cards go through the switch of the payment network (Visa, Mastercard, etc). With UPI, the NPCI switch will be used via QR codes.
More use-cases for BBPS
BBPS handles recurring bill payments for merchants, but not those such as fees, tax payments, and rent payments. It also doesn’t cover non-recurring payments.
The scope of BBPS has now been expanded to include all categories of payments and collections, both recurring and non-recurring. All billers—businesses and individuals—will be covered, too.
How SBMD helps merchants
Just as the customer is not always confident of receiving the goods, the merchant is also not always confident of receiving the payment. Since SBMD is an auto-debit, there is no fear of the payment not going through.
However, experts say that while the SBMD is, for all practical purposes, an auto-debit facility, there could be an additional OTP layer for UPI-user protection. That would depend on the operational guidelines of the National Payments Corporation of India. SBMD will lessen the dependence on cash, and make transactions frictionless and seamless, as with UPI.
Credit cards on the UPI platform
The NPCI is trying to encourage the use of credit cards via the UPI. As of now, offline payments through cards require a user to have the physical card and swipe/tap it on the merchants’ PoS machines.
The linkage of the UPI with the credit card will mean no physical cards will be needed, so the payment can happen as simply as it does today on G-Pay or PhonePe. Transactions through the credit-card linked UPI will probably be subject to the same terms that conventional credit-card transactions are, such as credit-limits, interest charges, etc.
