What is Digital Payment ?
The world has been moving towards all things digital for some time now. However, the year 2020 put into perspective the dire need to adapt to digital technology as soon as possible. This adaptation happened almost instantly with the lockdown coming into effect, especially for digital payments in India.
The Indian government has been promoting and propagating online payments aggressively, starting with demonetization back in 2016. ‘Digital India’ had been the guiding force of many economic and financial decisions that pushed Indians to switch to online payments.
What are the different methods of digital payments?
After the launch of Cashless India, we currently have ten methods of digital payment available in India. Some methods have been in use for more than a decade, some have become recently popular, and others are relatively new.
Unstructured Supplementary Service Data(USSD)
USSD was launched for those sections of India’s population which don’t have access to proper banking and internet facilities. Under USSD, mobile banking transactions are possible without an internet connection by simply dialing *99# on any essential feature phone.
Aadhaar Enabled Payment System (AEPS)
AEPS is a bank-led model for digital payments that was initiated to leverage the presence and reach of Aadhar. Under this system, customers can use their Aadhaar-linked accounts to transfer money between two Aadhaar linked Bank Accounts. As of February 2020, AEPS had crossed more than 205 million as per NPCI data.
Unified Payments Interface (UPI)
UPI is a payment system that culminates numerous bank accounts into a single application, allowing the transfer of money easily between any two parties. As compared to NEFT, RTGS, and IMPS, UPI is far more well-defined and standardized across banks. You can use UPI to initiate a bank transfer from anywhere in just a few clicks.
The benefit of using UPI is that it allows you to pay directly from your bank account, without the need to type in the card or bank details. This method has become one of the most popular digital payment modes in 2020, with October witnessing over 2 billion transactions.
Mobile Wallets, as the name suggests, is a type of wallet in which you can carry cash but in a digital format. Often customers link their bank accounts or banking cards to the wallet to facilitate secure digital transactions. Another way to use wallets is to add money to the Mobile Wallet and use the said balance to transfer money.
Nowadays, many banks have launched their wallets. Additionally, notable private companies have also established their presence in the Mobile Wallet space. Some popularly used ones include Paytm, Freecharge, Mobikwik, mRupee, Vodafone M-Pesa, Airtel Money, Jio Money, SBI Buddy, Vodafone M-Pesa, Axis Bank Lime, ICICI Pockets, etc.
Bank Prepaid Cards
A bank prepaid card is a pre-loaded debit card issued by a bank, usually single-use or reloadable for multiple uses. It is different from a standard debit card because the latter is always linked with your bank account and can be used numerous times. This may or may not apply to a prepaid bank card.
Internet Banking, also known as e-banking or online banking, allows the customers of a particular bank to make transactions and conduct other financial activities via the bank’s website. E-banking requires a steady internet connection to make or receive payments and access a bank’s website, which is called Internet Banking.
Today, most Indian banks have launched their internet banking services. It has become one of the most popular means of online transactions.
Mobile banking refers to the act of conducting transactions and other banking activities via mobile devices, typically through the bank’s mobile app. Today, most banks have their mobile banking apps that can be used on handheld devices like mobile phones and tablets and sometimes on computers.
Mobile banking is known as the future of banking, thanks to its ease, convenience, and speed. Digital payment methods, such as IMPS, NEFT, RTGS, IMPS, investments, bank statements, bill payments, etc., are available on a single platform in mobile banking apps. Banks themselves encourage customers to go digital as it makes processes easier for them too.
What are the benefits of digital payments?
In a country like India, where disparities are sometimes poles apart, ensuring financial equality becomes an issue of prime importance. One of the reasons why our government started vocalizing Cashless Economy and Digital India was to improve access to financial resources. There are multiple benefits that digital payments bring to the table.
Ease and convenience
One of the most significant advantages of digital payment is the seamless experience they provide to customers. Reduced dependency on cash, fast transfer speed, and the ease of transacting make online payments a preferred option. Traditional payment methods like cash and cheques add to factors like risk, steps, and physical presence. With digital payment, you can send and receive funds from anywhere in the world at the click of a button.
Customers transact more online when they see the ease, convenience, and security of online payments. This means that more and more people feel comfortable buying online, investing digitally, and transferring funds via electronic mediums. The increase in money movement and online business contributes to the progress of the economy. This is why online ventures are being launched every day and even more are making profits daily.
Digital payments are the way of the future. While this is hardly news to anyone in the payments space, the how is still in flux. Digital payments technologies — and consumer behaviors and preferences. Essentially, we are likely to see the removal of human intervention from most payments and banking methods, enabling consumers to seamlessly checkout and pay with minimal security.