How BHIM app has transformed the country’s digital payment ecosystem

The Mahabharata would have the mighty Bhim live unconquered, virtually indestructible. Aeons later, the eponymous app has gone from strength to strength, but may not prove immortal. UPI-powered Bharat Interface for Money (BHIM) was among the first tide of apps launched to complete digital payments using Universal Payments Interface (UPI).

It’s been quite a year. Growth has been impressive, to say the least. The number of banks live on BHIM have more than doubled to 65. The volume of transactions has magnified a whopping 212 times and the amount of money transacted ballooned 1,660 times. While that’s the growth in one year from BHIM’s launch, in December 2016, month-on-month growth has slowed down, particularly in the last six months.
For all its imposing metrics, BHIM’s greatest contribution has been less in enabling digital payments and more in creating an ecosystem that has helped India advance digital payments by about half a decade. BHIM as a percentage of total UPI transactions declined from 40% in January 2017 to 6.27% in December, though value transacted grew marginally from 21% to 23% in the same period.

Fewer people were using BHIM, but value increased as digital payment transactions have overall grown during the period. Newbies such as Google Tez and the more venerable MobiKwik, Paytm or PhonePe seem to have stolen some of BHIM’s thunder. Paytm, for instance, went live on UPI in the middle of last year and claims 15-20% share of UPI transactions.
PLAYING THE MASCOT
A lot of the attraction of digital payment apps lies in cashbacks and freebies, and part in the convenience of it all. As a result, it’s apps like BHIM, not pushed by any venture interest, that are seeing slower growth. BHIM is managed by the not-for-profit National Payments Corporation of India (NPCI). “BHIM has been a talisman for digital payments,” says Bipin Preet Singh, co-founder, MobiKwik, which claims 65 million users. “At events like the Olympics, you have a mascot. BHIM was mascot for UPI. It created awareness and trust among users at the peak of demonetisation. Others followed.”
As of January 1, 2018, BHIM had recorded 21.65 million downloads on Android and 1.03 million on Apple iOS. Vivek Balgavi, fintech lead for consultancy Price water house Coopers (PwC) feels BHIM has served its purpose. “BHIM was launched to showcase UPI’s potential. Its limitation has been lack of marketing.” The government hasn’t taken its foot off the pedal on digital payments. But to catch the attention of the consumer — who may be hanging out on Facebook, Twitter, Linkedin, WhatsApp or other social media platforms — the payment app needs to go there, a task that the likes of PhonePe are more easily able to do, with their considerable marketing heft.

“The new normal is, the bank is expected to go to the customer and not the other way round. The customer is on the social platform and whoever taps her there, gets the business,” says Balgavi of PwC. BHIM’s achievement has been in accelerating use of UPI, giving rise to the wave that apps such as Google Tez are riding.

Tez, launched in September, crossed 12 million active users and over half-amillion merchants by December 5. It was helped on its way by incentives such as a chance to win Rs 1,000-1 lakh every week, which does the additional trick of weaning users away from BHIM. Amazon offers 10% discount on digital payments and here, the more popular apps, wallets or cards score over others.
WHAT’S BEYOND
Ritesh Pai, chief digital officer, Yes Bank, says, “Overall, BHIM was a very positive move. It also helped penetrate the digital payments ecosystem. A lot of smaller banks, like cooperatives, use BHIM as they may not have the wherewithal to develop their own apps.”

Nonetheless, going less cash is still a long off. Even as more and more people pay electronically post-demonetisation, usage fluctuates — flat some months and spiking in others. Merchants are reluctant to invest in tools like point of sale machines to use debit/credit cards.
And most digital payments are P2P rather than among businesses or between merchants and consumers. Of a total of 107 million digital transactions in November, only 10 million were merchant transactions and the rest P2P. NPCI is not developing the merchant ecosystem, which may prove to be its Achilles’ heel.

To encourage digital payments, merchant discount rate (MDR) on debit cards was reduced from 0.75% to 0.5% in December by the Reserve Bank for transactions below Rs 2,000. MDR is charged by banks to merchants to enable payments via cards. Post March 31, RBI will review the framework for digital payment charges in consultation with stakeholders.
UPI crossed the Rs 10,000 crore transactions mark for the first time in December 2017. The next challenge is to create interoperable platforms, like enabling a Delhi metro card to be used to pay for daily need items or inter-wallet payment. MobiKwik, for one, is looking at expanding wallet use to include insurance, lending and money transfers for corporates.

According to a Google report, total payments via digital platforms in India are expected to touch $500 billion by 2020. By then, the current lot of fintech startups will be worth around $3 billion. As one developer jokes, if there’s another demonetisation or cash squeeze, people will certainly panic less, but digital platforms are likely to crash under the enormous load! Amrish Rau, chief executive, PayU, a gateway for online payments, believes that as usage of UPI increases via BHIM and other apps, credit in India could grow digitally, not via plastic (cards). “In the next five years, digital platforms will eclipse traditional and card-based systems for loans, other financial products and payments.” While this BHIM may not be strong enough, the army it has created will certainly win all.