Use fintech apps like Cred, PhonePe to pay credit card bills? July 1 could bring bad news

Fintech startups like Cred, PhonePe, BillDesk, and Inbeam Avenues are preparing for significant disruptions due to a new regulation mandating that credit card bill payments must go through a centralised billing network starting from July 1.

However, major Indian card issuers such as HDFC Bank with 20 million credit cards, ICICI Bank with 17 million, and Axis Bank with 14 million have yet to activate the Bharat Bill Payment System (BBPS), as reported by the Economic Times.

This situation means that platforms like PhonePe and Cred, which are members of BBPS, will not be able to process credit card dues for these large banks and other non-compliant lenders. Industry insiders fear that this could lead to a substantial decrease in transaction volumes, according to executives speaking with ET.

The Reserve Bank of India (RBI) mandated that all credit card payments transition to BBPS after June 30.

Speaking to Firstpost, Yashwant Lodha, Co-founder, PayNearby said, “The recent directive by the RBI to process all credit card bill payments through the Bharat Bill Payment System (BBPS) is a significant move towards enhancing the efficiency and security of the payment ecosystem.”

“BBPS, being a robust and well-integrated network with thousands of billers and the presence of all major banks, offers a seamless and standardised experience for customers. This initiative aims to lower integration costs for issuers, improve oversight of collection points, and establish a uniform grievance redressal mechanism,” added Lodha.

Currently, only eight out of 34 banks authorised to issue credit cards have activated bill payments on this central bank-backed network. These include major players like SBI Card, BoB Card, Kotak Mahindra Bank, Federal Bank, and IndusInd Bank.

“A few banks are yet to comply, likely due to their existing investments in direct connectivity with various channels, viewing BBPS as an additional integration layer,” said Lodha, on what could have possibly caused the delay.

The payments industry has requested a 90-day extension to the deadline, awaiting a decision from the regulator, as highlighted by the CEO of a leading payment firm. The Payments Council of India has formally petitioned the RBI on this matter, though no decision has been announced yet.

“While it is challenging to forecast the next steps on extension, we are confident that the regulator will prioritise customer interests, as it has consistently done in the past,” explained Lodha.

BBPS, driven by the National Payments Corporation of India (NPCI) under RBI oversight, offers a wide array of payment categories, from utilities to insurance premiums, mutual funds, and now credit cards.

Currently, credit card users can pay their bills through netbanking or auto-debit mandates, but third-party applications will be phased out unless an extension is granted.

NPCI’s Bharat Billpay (NBBL) is in discussions with major banks to onboard them onto BBPS, a process that could take several months. Meanwhile, there is speculation that the regulator might extend the deadline to mitigate potential disruptions, with an official decision anticipated later this month.

Data from NBBL indicates that credit card payments currently constitute a small fraction (1.5%) of total BBPS transactions, dominated by utilities and toll payments via Fastag. Despite the significant growth in credit card issuance and usage in recent years, the volume of bills paid through BBPS remains relatively low, with vast potential for growth once major private banks fully adopt BBPS.