BHIM vs. Other Mobile Payment Apps

What comes to your mind when you hear 'mobile wallet'? Do you think of PayTM, Mobikwik, or Freecharge? Well, a new mobile wallet has entered the realm of digital payments, and this one is a UPI (Unified Payment Interface) enabled wallet released by the government and is called BHIM (Bharat Interface for Money). This wallet aims to promote digital payments using the Aadhaar card number at its core.

BHIM vs. Other Mobile Wallets

1. The Main Difference
   BHIM is not a mobile wallet in the traditional sense, instead it's a unique blend of banking app and mobile wallet. BHIM provides an interface to transact directly from one bank account to the other via UPI. Further, as BHIM is backed by the NPCI (National Payments Corporation of India), the reliability associated with it is very high.

2. Interoperability
   The introduction of Unified Payments Interface in mid-2016 opened the doors for a simpler, and more efficient method of transacting between bank accounts. For instance, if you have a bank account with 3 UPI-enabled banks, BHIM will allow you to use any of these bank accounts to send or receive money. Interoperability could allow BHIM to replace our physical wallets with a digital one.

3. Security Concerns
   BHIM is a more secure alternative to any other digital wallet as it doesn't hold any money. Instead, it connects directly with the user's bank account. With BHIM you are required to use a pin for every transaction. In addition, BHIM uses a three-level security layer with Aadhaar linkage, making it a very secure interface.

4. How much can you spend through BHIM?
   With BHIM, the spending limit is Rs. 20,000 per day and Rs 10,000 per transaction. This might sound a little too less, but when viewed from a comparison perspective, this limit is higher than most e-wallets (which limit non-KYC accounts at Rs. 20,000 per month) but lower than banking UPI apps (which have Rs. 1,00,000 per transaction limit).

5. Cashback and Marketing contrivance
   The most important and widely relevant reason for e-wallets to thrive is the cashback that they provide. Almost all e-wallets have tie-ups with various vendors and merchants, hence they lure users to their platforms using various offers and cashbacks. With such compelling offers, e-wallets continue to grow at a very rapid pace, and BHIM lacks this marketing push. While UPI and BHIM are still in early stages, they will need the marketing push for gaining further traction.

6. The arena of credit usage
   E-wallets such as Freecharge and PayTm allow users to load money through the debit cards, credit cards, and net banking. Since BHIM doesn't load money, and transfers directly via the user's bank account, this structure creates a problem for the user. Credit card usage is on the rise, and not allowing credit card based transactions restricts acceptability for BHIM.

Is BHIM replacement for e-wallets?

While e-wallets and BHIM both promote a less-cash economy, the business model of both is quite different. The demonetization process has enhanced the value of e-wallets significantly in our economy, in contrast with the existential crisis that they were facing a few years back. As of now, BHIM will not replace e-wallets. Maybe in future, it will, but for that to happen, BHIM must expand its business model to include credit payments, cashbacks/ offers and a string marketing push.