Digital Payment

About Digital Payments

The Government of India has been taking several measures to promote and encourage digital payments in the country. As part of the ‘Digital India’ campaign, the government aims to create a ‘digitally empowered’ economy that is ‘Faceless, Paperless, Cashless’. There are various types and modes of digital payments. Some of these include the use of debit/credit cards, internet banking, mobile wallets, digital payment apps, Unified Payments Interface (UPI) service, Unstructured Supplementary Service Data (USSD), Bank prepaid cards, mobile banking, etc.

Digital payment methods are often easy to make, more convenient and provide customers the flexibility to make payments from anywhere and at anytime. These are a good alternative to traditional methods of payment and speeden up transaction cycles. Post demonetization, people slowly started embracing digital payments and even small time merchants and shop owners started accepting payments through the digital mode.

What is a Digital Payment

To put it in simple words, a digital payment occurs when goods or services are purchased through the use of various electronic mediums. There is no use of cash or cheques in this type of payment method.

What is a Cashless Economy

In a cashless economy, all transactions are carried out using different types of payment methods and this does not involve the physical use of money for the purchase of various goods and services.

10 Types of Digital Payment Methods in India

  1. Banking cards
  2. USSD
  3. Aadhaar Enabled Payment System (AEPS)
  4. UPI
  5. Mobile Wallets
  6. Bank pre-paid cards
  7. Point of Sale (PoS)
  8. Internet Banking
  9. Mobile Banking
  10. Bharat Interface for Money (BHIM) app
Digital Payment
Digital Payment

1. Banking cards: Cards are among the most widely used payment methods and come with various features and benefits such as security of payments, convenience, etc. The main advantage of debit/credit or prepaid banking cards is that they can be used to make other types of digital payments. For example, customers can store card information in digital payment apps or mobile wallets to make a cashless payment. Some of the most reputed and well-known card payment systems are Visa, Rupay and MasterCard, among others. Banking cards can be used for online purchases, in digital payment apps, PoS machines, online transactions, etc.

How to get Banking cards?

  • Apply with your respective bank and provide Know Your Customer (KYC) details
  • The card will get activated within a week and you will be allotted a 4-digit pin, which can be used for all transactions

2. USSD: Another type of digital payment method, *99#, can be used to carry out mobile transactions without downloading any app. These types of payments can also be made with no mobile data facility. This facility is backed by the USSD along with the National Payments Corporation of India (NPCI). The main aim of this type of digital payment service is to create an environment of inclusion among the underserved sections of society and integrate them into mainstream banking. This service can be used to initiate fund transfers, get a look at bank statements and make balance queries. Another advantage of this type of payment system is that it is also available in Hindi.

How to Use *99#?

  • This service can be used by dialling *99#, after which the customer can interact with an interactive voice menu through their mobile screen.
  • To use the service the mobile number of the customer should be the same as the one linked to the bank account
  • The next step is to register for USSD, MMID (Mobile Number Identifier) and MPIN

3. AEPS: Expanded as Aadhaar Enabled Payment System, AEPS, can be used for all banking transactions such as balance enquiry, cash withdrawal, cash deposit, payment transactions, Aadhaar to Aadhaar fund transfers, etc. All transactions are carried out through a banking correspondent based on Aadhaar verification. There is no need to physically visit a branch, provide debit or credit cards, or even make a signature on a document. This service can only be availed if your Aadhaar number is registered with the bank where you hold an account. This is another initiative taken by the NPCI to promote digital payments in the country.

How to use AEPS?

  • It is very simple to use AEPs, all you need to do is to provide the accurate Aadhaar number and the payment will be successfully made to the concerned merchant

4. UPI: UPI is a type of interoperable payment system through which any customer holding any bank account can send and receive money through a UPI-based app. The service allows a user to link more than one bank account on a UPI app on their smartphone to seamlessly initiate fund transfers and make collect requests on a 24/7 basis and on all 365 days a year. The main advantage of UPI is that it enables users to transfer money without a bank account or IFSC code. All you need is a Virtual Payment Address (VPA). There are many UPI apps in the market and it is available on both Android and iOS platforms. To use the service one should have a valid bank account and a registered mobile number, which is linked to the same bank account. There are no transaction charges for using UPI. Through this, a customer can send and receive money and make balance enquiries.

FAQs of Digital Payment

  1. How are digital payments better than cash?

    Ans: Digital payments are much easier and safer than cash payments. They are much more convenient than cash payments as well. Since they are digital, you do not have to carry cash as well.

  2. What are the different security requirements of digital payments?

    Ans: The different security requirements of digital payments are mentioned below:

    • Confidentiality
    • Integrity
    • Authentication
    • Availability
    • Authorization
    • Non-repudiation
  3. What are the objectives of digital transactions?

    Ans: The main objectives of digital transactions are to reduce the costs and risks of handling cash and to increase the ease of conducting transactions.

  4. How do digital payments work?

    Ans: Payments that are done over mobile channels and the internet are digital payments. Digital payments can also be defined as any payments that are done online via the internet or mobile-enabled services.

  5. How are digital payments important?

    Ans: Since digital payments reduce the costs of providing poor people with financial services, they have become a vital tool in improving financial inclusion. The convenience and safety of using insurance, payments, and savings products also increase by using digital payments.

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How to use UPI?

  • Download the app on Android or iOS platform
  • Register for the service by providing bank account details
  • Create a VPA, get an MPIN

5. Mobile Wallets: A mobile wallet is a type of virtual wallet service that can be used by downloading an app. The digital or mobile wallet stores bank account or debit/credit card information or bank account information in an encoded format to allow secure payments. One can also add money to a mobile wallet and use the same to make payments and purchase goods and services. This eliminated the need to use credit/debit cards or remember the CVV or 4-digit pin. Many banks in the country have launched e-wallet services and apart from banks, there are also many private players. Some of the mobile wallet apps in the market are Paytm, Mobikwik, Freecharge, etc. The various services offered by mobile wallets include sending and receiving money, making payments to merchants, online purchases, etc. Some mobile wallets may charge a certain transaction fee for the services offered.

How to use a mobile wallet?

  • Download the app
  • Register for the service by following instructions and providing all details
  • Load money

6. Bank pre-paid cards: A prepaid card is a type of payment instrument on to which you load money to make purchases. The type of card may not be linked to the bank account of the customer. However, a debit card issued by the bank is linked with the bank account of the customer.

How to Use a Prepaid Card?

  • Apply for the card
  • Get pin
  • Load money from your bank account/debit card

7. PoS terminals: Traditionally, PoS terminals referred to those that were installed at all stores where purchases were made by customers using credit/debit cards. It is usually a hand held device that reads banking cards. However, with digitization the scope of PoS is expanding and this service is also available on mobile platforms and through internet browsers. There are different types of PoS terminals such as Physical PoS, Mobile PoS and Virtual PoS. Physical PoS terminals are the ones that are kept at shops and stores. On the other hand, mobile PoS terminals work through a tablet or smartphone. This is advantageous for small time business owners as they do not have to invest in expensive electronic registers. Virtual PoS systems use web-based applications to process payments.

8. Internet Banking: Internet banking refers to the process of carrying out banking transactions online. These may include many services such as transferring funds, opening a new fixed or recurring deposit, closing an account, etc. Internet banking is also referred to as e-banking or virtual banking. Internet banking is usually used to make online fund transfers via NEFT, RTGS or IMPS. Banks offer customers all types of banking services through their website and a customer can log into his/her account by using a username and password. Unlike visiting a physical bank, there are to time restrictions for internet banking services and they can be availed at any time and on all 365 days in a year. There is a wide scope for internet banking services.

9. Mobile Banking: Mobile banking is referred to the process of carrying out financial transactions/banking transactions through a smartphone. The scope of mobile banking is only expanding with the introduction of many mobile wallets, digital payment apps and other services like the UPI. Many banks have their own apps and customers can download the same to carry out banking transactions at the click of a button. Mobile banking is a wide term used for the extensive range or umbrella of services that can be availed under this.

10. Bharat Interface for Money (BHIM) app: The BHIM app allows users to make payments using the UPI application. This also works in collaboration with UPI and transactions can be carried out using a VPA. One can link his/her bank account with the BHIM interface easily. It is also possible to link multiple bank accounts. The BHIM app can be used by anyone who has a mobile number, debit card and a valid bank account. Money can be sent to different bank accounts, virtual addresses or to an Aadhaar number. There are also many banks that have collaborated with the NPCI and BHIM to allow customers to use this interface.

How to Use BHIM App?

  • Download and install the BHIM app
  • Choose a language
  • Register for the service by providing mobile number linked to bank account
  • Add bank-related information and set up a UPI PIN by following the given instructions

Benefits of Digital Payments

  • Faster, easier, more convenient: Perhaps, one of the biggest advantages of cashless payments is that it speeds up the payment process and there is no need to fill in lengthy information. There is no need to stand in a line to withdraw money from an ATM or carry cards in the wallet. Also, with the move to digital, banking services will be available to customers on a 24/7 basis and on all days of a year, including bank holidays. Many services like digital wallets, UPI, etc, work on this basis.
  • Economical and less transaction fee: There are many payment apps and mobile wallets that do not charge any kind of service fee or processing fee for the service provided. The UPI interface is one such example, where services can be utilized by the customer free of cost. Various digital payments systems are bringing down costs.
  • Waivers, discounts and cashbacks: There are many rewards and discounts offered to customers using digital payment apps and mobile wallets. There are attractive cash back offers given by many digital payment banks. This comes as boon to customers and also acts a motivational factor to go cashless.
  • Digital record of transactions: One of the other benefits of going digital is that all transaction records can be maintained. Customers can track each and every transaction that is made, no matter how small the transaction amount this.
  • One stop solution for paying bills: Many digital wallets and payment apps have become a convenient platform for paying utility bills. Be it mobile phone bills, internet or electricity bills, all such utility bills can be paid through a single app without any hassle.
  • Helps keep black money under control: Digital transactions will help the government keep a track of things and it will help eliminate the circulation of black money and counterfeit notes in the long run. Apart from this, this may also give a boost to the economy as the cost of minting currency also goes down.

Digital payments are slowly gaining popularity in India and there are many apps that are being launched in this sector. It has become a hassle-free and secure way to make payments.

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News About Digital Payment

  • Facebook Likely to have Digi Payment Feature like WhatsApp

    Popular social media application website Facebook is likely to test a digital payments feature on the likes of what WhatsApp has recently launched in India. However, the Facebook payment system may be quite different from what is currently being offered by WhatsApp.

    In an effort to make this a reality, Facebook is contemplating on moving into the digital payments segment in India. As per reports, Facebook has introduced a version of its digital payment interface in the form of a beta version through the messenger platform. This will be completely separate from what WhatsApp has to offer. The already launched version is what we can call a type of recharge payment interface for smartphones.

    The digital payment ecosystem is growing in the Indian economy and is predicted to be the next big thing. There are a number of such payment apps that are currently available. Google has also launched its very own payment app called Google Tez. The probability of this will be explored through the Marketplace on the Facebook Messenger application by this big wig in the social media industry.

    The model of design will be pretty similar to what is been seen on the WhatsApp payment application.

    23 April 2018

  • Focus on Infrastructure, End User Tools to Secure Digital Payments: Gulshan Rai

    Gulshan Rai, the National Cybersecurity Coordinator on Friday urged service providers to focus on infrastructure and end user tools in a bid to secure digital payments. He said so while speaking on the occasion where a joint study by Data Security Council of India (DSCI) and PayPal India on ‘Securing India’s Digital Payment Frontiers’ was released. The study conducted analyzed the country’s journey in digital payments and its cybersecurity dynamics as well as future trends and best practices at the enterprise level. A recent report published by the Reserve Bank of India stated that the number of digital payments in the country stood at 1.06 billion as of December, 2017 with the government targeting 25 billion transactions by the end of the fiscal year. Considering this the prediction made by Credit Suisse, a Swiss financial services holding company is a real possibilty. The company had stated that India’s digital payments industry is expected to grow five-fold by 2023 which is currently worth nearly 200 billion dollars.

    15 March 2018

  • RBI Urges Entities, Banks to Collaborate with Startups

    In an effort to promote cashless transactions across the country, the Reserve Bank of India (RBI) has urged banks, government entities and other regulatory bodies to work in collaboration with the startup ecosystem. A number of tax benefits are likely to be offered to those business owners who go on to integrate digital payments in their transactions.

    15 February 2018

  • Digitised Transactions Improve Almost 4% in January in Comparison to December

    As the world entered the new year, digital payments have only gained momentum through the month of January also. According to a latest study released by the Reserve Bank of India, the aggregate of digital transactions in January has increased almost by 4% to touch the 1.1 billion against 1.06 billion in December. While the number of transactions across all the major payment parameters showed consistent rise prepaid payment instruments or mobile wallets have proved that they have undergone a strong growth of approximately 14% between December and January.

    PPIs showed 113.6 million transactions in January compared to 99 million in the last month. Wallets showed a better growth against Unified Payments Interface (UPI) based transactions which showed a rise of 4.2%.

    12 February 2018

  • Digital Payments may See Sharp Rise in Near Future

    There may be a sharp and unprecedented rise in the number of digital payment transactions in the country in the coming years.

    It has been observed that the number of UPI transactions have increased 8-fold in the last few months. With UPI, fund transfer requests can be initiated without providing IFSC code or account number. Money can be sent using a virtual address. It is predicted that the cashless payments sector will reach 1 trillion in the next 5 years. UPI and Aadhaar will help increase digital penetration, according to sources.

    7 February 2018

  • Most of Amazon India Transactions Made Digitally

    It has come to light that around 60% of all of Amazon India’s transactions were made digitally post demonatization.

    A number of Amazon customers used the Amazon Pay wallet to make payments digitally. The government has been taking a number of initiatives to encourage digital payments in the country.

    30 January 2018

  • Most of Amazon India Transactions Made Digitally

    It has come to light that around 60% of all of Amazon India’s transactions were made digitally post demonatization.

    A number of Amazon customers used the Amazon Pay wallet to make payments digitally. The government has been taking a number of initiatives to encourage digital payments in the country.

    30 January 2018

  • Digital Payments on The Rise After Demonetization Drive

    The demonetization drive that was implemented in November 2016, gave a good push to the digital payments industry, even in rural areas across the country.

    There were many small-time business owners and petty shop owners who adopted digital payment methods. More and more people from smaller towns in India are using various types of payment apps. The use of mobile-based payment methods are catching up, according to experts in the financial industry.

    Many digital payments apps are now compatible with UPI, using which funds can be transferred without IFSC code or bank account number. All you need is a Virtual Payment Address (VPA).

    22 January 2018

  • Digital Payments to be Discussed at GST Council Meeting

    The major focus of the next GST Council meeting will be on the digital payments drive in the country. Discussions are likely to be held on how to increase and provide incentives for digital payments under the GST regime.

    Apart from this, various issues of importance will be discussed in the meeting including certain revisions in existing GST laws. Tax laws relating to hotel accommodation and input tax credit are also likely to be addressed. Reports of various committees are also likely to be reviewed at the meeting session.

    22 January 2018

  • 11% Growth in Digital Payments in December 2017

    There was a huge surge in the number of digital transactions in the last month of 2017, which was much higher when compared to the previous year, 2016.

    The sum total of the number of digital transactions in December 2017 was 1 billion and the aggregate number of transactions made added up to Rs.125.53 lakh crore, according to data obtained from the National Payments Corporation of India (NPCI). There has been a significant improvement as far as digital transactions are concerned  in 2017 when compared to 2016.

    22 January 2018

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