Digital payments

Briefs the Transformation of Digital payments over a period of time especially in India. Also provides the Pros and cons of the Digital payments.

1. Digital Payments By Vivek Chinnaiah

2. Agenda: Background of Payments Digital Payments in India Statistics Overview Customer Journey in Banks Reasons for increase in Digital payments Types of Digital Payments Advantages/Disadvantages of Digital Payments Barriers for Digital payments

3. Background of Payments 3000 B.C.  — Payment is barter: In its most basic form, barter was simply an exchange of goods between two individuals, each one having something of value to the other . 700 B.C. —  Payment is precious metals: The first coins were minted in 700 B.C. in India, China and Greece, and quickly became popular as the first legal tender ever recorded . 17th Century . — Payment is bank notes: Hardly needs an explanation. This is cash and simple; the paper money that is still largely used all over the world 21st Century, present day —  Payment is digital: While it would be in the 1990’s that digital payments became more accessible to the general people, back then, they were rife with problems and with very poorly designed user interfaces. In the 21st century, however, digital payments have evolved at great speed when compared to the millennia it took us to get there.

4. What is Digital Payment: Digital payment is a transaction that takes place via digital or online modes, with no physical exchange of money involved. This means that both parties, the payer and the payee, use electronic mediums to exchange money. D igital payments can take place on the internet as well as on physical premises. For example, if you buy something from Amazon website and pay for it via UPI, it qualifies as a digital payment. Similarly , if you purchase something from your local store and choose to pay via UPI/Card instead of handing over cash, that also is a digital payment.

5. Digital Payment in India- a Review India has always been extremely comfortable with the traditional method of making payments, which is “via cash”. Nevertheless, it is important to understand how digitization with regard to making payments has helped the country in numerous ways. It is a known fact that India has taken a sharp turn towards “becoming a cashless economy” after demonetization and it has nudged the country even more towards settling as a digital mode. Digital India movement/initiative by the government has led to a humongous shift in the way Indians deal with making payments for purchases. 

6. Based on data from RBI – here is growth in Digital Payments in India over the p ast years: https ://community.nasscom.in/communities/digital-transformation/fintech/india-digital-payments-2020-launching-the-first-adoption-index-time-is-now.html https://www.thehindubusinessline.com/news/digital-payments-in-india-to-grow-to-717-of-all-payment-transactions-by-2025-report/article34204827.ece

7. Customer Journey in Banks:

8. The R easons for increase in Digital Payments Greater convenience Improved security features: Banks/institutions spending millions of dollars on cyber security. Helps you keep track of your payments Tax benefits Demonetization/Digital India: In November 2016, Indian govt. announced the demonetization of all ₹500 and ₹1,000 banknotes of old currency Expanding Use of Smartphones: Increasing use of Smart phones which enables many people to go for cashless mode Offers , Rewards, Cashbacks and Discounts: This is the strategy of many companies/Banks as a marketing to improve the sales which also leads to more Digital payments

9. Types of Digital Payments Banking cards ( Debit/Credit): Banking cards offer consumers more security, convenience, and control than any other payment method. The wide variety of cards available – including credit, debit and prepaid offers enormous flexibility, as well. These cards provide 2 factor authentications for secure payments e.g secure PIN and OTP. RuPay , Visa , MasterCard are some of the example of card payment systems Unstructured Supplementary service data (USSD ): This service allows mobile banking transactions using basic feature mobile phone , there is no need to have mobile internet data facility for using USSD based mobile banking ex- CRN  5676788 Unified Payment Interface: U n ified Pa y m en ts Int e rface ( U PI) i s a s y stem th a t p o w ers m u lti p l e ban k ac c ounts i n to a single mobi l e application. It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience. Internet Banking/ Mobile Banking: Internet banking, also known as online banking, e-banking or virtual banking, is an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the financial institution's website/or Mobile App

10. Continue.. National Electronic Fund Transfer (NEFT ) Using NEFT, people can electronically transfer money from any bank branch to a person holding an account with any other bank branch, which is participating in the payment system. Fund transfers through the NEFT system do not occur in real-time basis and the fund transfer settles anytime in 24hrs. Real Time Gross Settlement (RTGS ) Real-Time Gross Settlement (RTGS) is another payment system in which the money is credited in the beneficiary’s account in real-time.  The RTGS system is primarily meant for large value transactions that require and receive immediate clearing . Immediate Payment Service (IMPS ): Immediate Payment Services(IMPS) is a real-time instant inter-bank funds transfer system managed by National payment corporation of India. IMPS is available 24/7 throughout the year including bank holidays, unlike NEFT and RTGS .

11. Mobile wallets: G oogle pay P hone pay BHIM UPI PayTm A nd many more

12. Advantages of online payments Instant Payment : Electronic payments are much faster than the traditional methods of payments such as cash or cheques. In the case of online payments, you do not have any constraint of time or location. You can easily make payments at any time from anywhere across the globe.   Higher payment security : Electronic payment systems offer you multiple ways of securing your payments such as tokenization, encryption, SSL, etc. Now your customers do not have to enter their card details every time as they can save their card details or complete their transactions by using a One Time Password. Low Maintenance for Banks : They can reduce cheques, and most of the paper works. Fast and convenience : Electronic payments can help you to provide Fast and convenient payment experience to users/customers. Low risk of T heft : If you are using cash for accepting payments from customers, chances are there it can be stolen. Also, you need to take high safety measures in depositing cash into your bank account . But this risk can be decreased if you are using a secure electronic payment system in your business . By using it, you do not have to worry about your payment record . Transparent : At most Transparent in all type of transactions that happen digitally. Contactless : In the times of the COVID-19 pandemic, people have started finding ways of avoiding human touch to save themselves from getting affected by the coronavirus. Due to this, the need for contactless payments has increased.

13. Disadvantages of online payments As well as advantages, Online payment methods have several disadvantages. Service fees Payment gateways and third-party payment processors charge service fees. Online payment methods are inconvenient for offline sales. Vulnerability to cybercriminals: Cybercriminals can disable online payment methods or exploit them to steal people’s money or information. Relaying more on telecommunication infrastructure Internet and server problems can disable online payment methods. Miscellaneous Technical problems Threat for diminishing small businesses

14. Barriers for Digital Payments in India ILLETRACY is the biggest problem in India. In rural are most of the people do not use digital payment they are using cash. do not have proper knowledge about digital payment . Fear of losing money Merchant do not accept digital payment Digital Payment will be shown on bank account statement so it will be taxable for merchants that’s why they are not taking payment . Habit of using physical cash People are habitual of using cash they are not using digital payment. They are using cash since ages so they find difficult to change their habit . .

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