Future of Digital Payments in India
In India’s voyage of becoming a cashless economy, two major occasions played an extensive role, ‘demonetization’ and ‘COVID-19’ where one has led to the rapid adoption of e-wallets, credit, and debit cards as a way of payment another one became the central dogma of digital payments ecosystem.
Back in 2016, when demonetization came into the picture, the prime pivot of the government was to convert India from a cash-based economy to a cashless economy and thus increases the future of digital payments. But India had witnessed digitization with steady progress way back in the 90’s.
With the vanguard of cybernetics and mechanics, technologies like ATM, credit and debit cards, MICR followed by e-wallets, prepaid cards, recharge vouchers, etc; the payment industry was supported by new technology and innovations. With the growth of the Fintech industry, the mode of payments has taken a turn and transformed, witnessing massive innovative solutions and methods to transact digitally that too with ease!
What is a Digital Payment?
Digital Payment is a transaction that takes place via digital or online modes, with no physical exchange of cash or money involved. This means that both parties, the payer and the payee, use electronic mediums to exchange money.
Please note that digital payments can take place on the internet as well as on physical premises. For example, if you buy something from an e-commerce website and pay for it via UPI, it qualifies as a digital payment.
Similarly, if you purchase something from your local Kirana store and choose to pay via UPI instead of handing over cash, that also is a digital payment
Different methods of Digital Payments
To achieve expeditious movement into cashless, digital payments economy across all states and sectors and to promote rapid adoption of the digital payments system, various digital payments systems appropriate to different sectors of the economy and coordinating efforts to make them accessible and user- friendly.
The following digital payments are currently being promoted across the country for the adopting future of digital payments.
1. Banking Cards
Andhra Bank launched the first credit card in India in 1981 and since then it’s been widely in use. Debit/Credit cards, or prepaid cards acts as an alternative to cash payments. Cards are preferred because of several reasons, like convenience, portability, safety and security but it is not only limited to these.
This was the only mode of digital payment that was popular in online transactions and physical transactions alike. Nowadays, many apps are being launched with the sole purpose of managing card transactions like cred, square etc.
2. 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.
This number is operational across all Telecom Service Providers (TSPs) and allows customers to avail of services including interbank account to account fund transfer, balance inquiry, and availing mini statements. Around 51 leading banks offer USSD service in 12 different languages, including Hindi & English.
3. 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 Aadhaarlinked Bank Accounts. As of February 2020, AEPS had crossed more than 205 million as per NPCI data. This is by far the best mode to increase the future of digital payments system.
AEPS doesn’t require any physical activity like visiting a branch, using debit or credit cards or making a signature on a document. This bank-led model allows digital payments at PoS (Point of Sale / Micro ATM) via a Business Correspondent(also known as Bank Mitra) using Aadhaar authentication.
Bharat ATM is a NEO Bank Application that offers all the basic banking services basic banking, transaction, loans or investment services from the grocery, Kirana, general, medical stores or any retail store near you.
4. Point of Sale (PoS)
PoS(Point of Sale) is known as the location or segment where a sale happens. For a long time, PoS terminals were considered to be the checkout counters in malls and stores where the payment was made.
The most common type of PoS machine is for Debit and Credit cards, where customers can make payment by simply swiping the card and entering the PIN. With digitization and the increasing popularity of other online payment methods, new PoS methods have come into the picture.
First is the contactless reader of a PoS machine, which can debit any amount up to Rs. 2000 by auto-authenticating it, without the need of a Card PIN.
5. Mobile Banking
Mobile banking is known as the future of digital payments, 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.
6. Micro ATM
Micro ATM is a device for Business Correspondents (BC) to deliver essential banking services to customers. These Correspondents, who could even be local store owners, will serve as a ‘micro ATM’ to conduct instant transactions.
They will use a device that will let you transfer money via your Aadhaar linked bank account by merely authenticating your fingerprint. Essentially, Business Correspondents will serve as banks for the customers.
Customers need to verify their authenticity using UID(Aadhaar). The essential services that will be supported by micro ATMs are withdrawal, deposit, money transfer, and balance inquiry. The only requirement for Micro ATMs is that you should link your bank account to Aadhaar.
7. Internet Banking
Today, most Indian banks have launched their internet banking services. It has become one of the most popular means of online transactions. Every payment gateway in India has a virtual banking option available. NEFT, RTGS, or IMPS are some of the top ways to make transactions via internet banking.
8. 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.
9. 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.A prepaid card can be created by any customer who has a KYC-complied account by merely visiting the bank’s website. Corporate gifts, reward cards, or single-use cards for gifting purposes are the most common uses of these cards
10. Mobile Wallets
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 to promote future of digital payments. 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
The digital payment wave in India is not going anywhere. With financial literacy and financial accessibility on everyone’s mind, online payments are going to grow exponentially. As a business and a professional, right now is the right time to onboard the digital payment wagon and enable your customers to transact online securely.