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Unsecured loans, which do not carry any collateral, pose a higher risk to lenders, making timely and accurate repayments essential. Presently, there are 64 credit card issuing banks with HDFC holding 20% of the market share. It is followed by SBI with 18.5% share, ICICI Bank with 16.6% share, Axis Bank with 14% share and Kotak Mahindra Bank with 5.8% share.
As per the Reserve Bank of India’s Statement on Deployment of Gross Bank Credit by Major Sectors, there has been a sharp increase in outstanding credit card receipts, from ₹1.75 trillion in August 2022 to ₹2.76 trillion in August 2024. This indicates a significant rise in unsecured lending by Indian banks. As per RBI, there were 105 million outstanding credit cards in August 2024 with a million additions during the month alone with a CAGR of 11.5% in the last four years.
Present Challenges
Credit card users often need to rely on multiple non-bank consumer apps or Credit card Issuing bank-specific Apps or websites for monthly credit card bill payments. This fragmentation of making bill payment on non-bank payment apps leads to inefficiencies such as manual entry of exact bill amounts and the need to remember due dates, increasing the risk of missed or delayed payments.
There has been a tremendous growth in the volume of credit card transactions. As per RBI, there were close to 400 million credit transactions in August 2024 rising from 245 million transactions in August 2022. Since credit cards do not have any collateral, the risk of defaults is higher, making payment delays more problematic for banks’ financial health and contributing to a potential increase in non-performing assets (NPAs) for banks.
Policy Change and Implementation
To address the growing complexities and risks associated with the sharp rise in unsecured lending through credit cards, RBI has mandated apps to route all third-party apps credit card bill payments through the Bharat Bill Payment System (BBPS) only is a critical step from July 2024 onwards.
As of July 1, 2024, twelve banks were live on BBPS including major credit card players like SBI and Kotak Bank. However, several major banks like Axis Bank, HDFC Bank and YES Bank are yet to integrate with BBPS.
Benefits to Credit Card Bill Payers, Customer Apps (BBPCOU) and Banks
Benefits for Users:
Routing credit card payments through BBPS significantly enhances the user experience. By consolidating payments into a single app, users receive timely reminders and follow-ups through apps registered as BBPS-consumer operating units.
Previously, apps could only send reminders through SMS or email, relying on parsed customer data and limited to notifications sent with broad consent at onboarding.
This approach required complex tools to parse SMS messages and often lacked precision, as apps had no direct access to exact bill amounts or installment options, limiting flexibility compared to bank-native apps. Additionally, delays in bill payment confirmations often meant that even after a customer paid their bill, reminders would still be sent until the bank system updated, leading to user frustration.
By providing apps with real-time bill amounts, settlement updates, and standardised reminders, BBPS eliminates these issues, creating a smoother, more reliable user experience and reducing unnecessary alerts. This feature reduces the likelihood of missed or delayed payments, helping users avoid late fees and negative impacts on their credit scores. The platform’s standardisation of fees charged for bill payments also brings transparency, sparing users from unpredictable or excessive charges. Additionally, BBPS simplifies the process by consolidating multiple payment functions, making it easier for users to keep track of their payments, view transaction history, and choose preferred payment modes in a single app.
Benefits for Non Bank Consumer Apps:
For third-party payment apps, routing credit card payments through BBPS integration resolves many operational challenges previously associated with bill collection. Previously, these apps had to integrate separately with each credit card-issuing bank, which made standardization difficult and increased their operational load. BBPS simplifies this by providing a unified integration with multiple banks, reducing setup complexity and ensuring consistent settlement protocols.
Presently, many consumer apps gain access to real-time bill amounts through SMS parsing, allowing them to send reminders. However, there is no status update and offer users convenient options like installment payments, which were previously available mainly through bank-specific channels. With BBPS, apps can now provide immediate status updates and comprehensive reminders, enhancing user engagement and reliability compared to past reliance on parsed SMS and email notifications alone.
Benefits for Credit Card Issuer Banks:
The BBPS mandate also provides strategic and operational advantages for banks. With structured reminders and payment follow-ups managed through BBPS, banks benefit from more timely payments and reduced defaults, helping them manage their unsecured lending portfolios more effectively.
Moreover, centralising bill payments on BBPS reduces the traffic on bank-specific platforms, leading to significant IT and cloud cost savings. Banks also gain from BBPS’s standardised dispute resolution and settlement protocols, which streamline issue resolution and improve user satisfaction. While fewer visits to their platforms may slightly reduce direct engagement, banks benefit from a more efficient, regulated payment ecosystem, helping them focus resources on core banking operations.
Conclusion
Routing credit card bill payments through the BBPS marks a vital step in streamlining India’s credit card ecosystem. For users, BBPS brings a unified payment experience, reducing delays, late fees, and offering transparent fees. Payment apps gain efficiency by eliminating the need for individual bank integrations and ensuring real-time updates, while banks benefit from reduced defaults and lower IT costs through a standardised, centralised system.
This policy fosters a secure, efficient, and user-friendly payment environment, enhancing stability and convenience for all stakeholders.
—The author, Dharmender Jhamb, is Partner, Grant Thornton, and a senior Fintech industry leader. The views are personal.
