A digital payment sometimes called an electronic payment, is a good alternative to traditional methods of cash payment and speeds up transaction cycles from person to person, person to business, person to government, Government to person, business to business, business to Government, etc. “Faceless, Paperless, Cashless” is one of the professed roles of the Digital India programme. In India, we have over 45 types of digital payment systems, digital enablers, and payment options available to consumers. India is a global frontrunner in the digital payment landscape, accounting for a stellar 46 per cent of the global digital transaction volumes in 2022, according to PIB press reports.
The Global report of US-based payment systems company ACI on payment trends states that in the year 2020 transaction volume share in India stood at 15.6% and 22.9% for instant payments and other electronic payments, respectively, while paper-based payments had a considerable share of 61.4%. According to ACI Worldwide, digital payments in India are set to account for 71.7% of the total payments volume by 2025, leaving cash and cheques at 28.3%. It further said, that in respect of real-time online transactions in 2020, India is ahead of the top 10 countries such as China, the US, South Korea, Thailand, the UK, and others countries. The National Payment Corporation of India (NPCI) states in its key findings of 2020 that “Overall one-third of Indian households are using it in some form or the other”. Almost a quarter of the households in the bottom 40% income group are using digital payments as well and it has not remained a rich or well-educated person’s preserve, and 15% of households in the bottom and middle categories would like to adopt digital payments, it said.
Here is a list of 45 types of digital payment systems, digital enablers, and payment options available to consumers in India.
The Aadhaar Payment Bridge (APB) System, uses the Aadhaar number for electronic crediting of government subsidies and benefits in the Aadhaar-linked bank account which was earlier mostly done either in cash or cheque. Besides transferring the benefits and subsidies under DBT schemes, the system also serves the goal of financial inclusion and provides an opportunity for the Government to attempt financial re-engineering of its subsidy management program.
Aadhaar Enabled Payment System (AePS) is a system developed by the National Payments Corporation of India (NPCI). Banking, as well as non-banking transactions, can be performed through a banking correspondent of any bank. Under the Aadhaar Enabled Payment System (AePS), the Aadhaar number is used not only to identify the beneficiary but also to authenticate transactions. The financial transactions/services include cash deposits, balance enquiry, and Aadhaar to Aadhaar fund transfers. Nonfinancial transactions like – Demographic Authentication, Best Finger Detection (BFD), and e-KYC can be done under AePS.
When you enter an ATM kiosk you find an ATM (Automated Teller Machine) consisting of the following; a). Video display monitor, b)Keyboard/keypad, c)touch screen. Inside the machine a host computer is attached which is connected to the ATM network. Besides, the computer there are slots inside the ATM for various purposes viz. card reader, cash dispenser, envelope dispenser, Cash deposit slot, etc.
The Micro ATM is the developed version of point of sales (POS) terminals with advanced features like the biometric scanner (fingerprint scanner) attached to it. Unlike automated teller machines (ATMs) where cash transactions do not require human intervention, micro ATMs need a human being appointed by the bank (business correspondent) to act as the cash handler for the operations.
White Label ATMs (WLAs) are the ATMs owned by non-banking entities. These ATMs do not display the logos of any bank. Bank Customers can withdraw money from debit cards/credit cards/prepaid cards issued by the banks at WLAs but they have to pay a fee for the service provided to them.
The debit card/credit card/smart card payments are accepted by railways, airlines, malls, hotels, major shops and business establishments. For accepting payments through cards the merchant establishments need a Point of Sale (POS) terminal. The sale transactions made through POS terminal is called Point of Sale (POS) business.
The bill payment system in India has grown enormously over the years. The bill payments arise out of trade and service transactions including utility bills, taxes, school college fees, etc. In our country, at present these payments are predominantly made through cash and cheques. Although, payment through electronic mode exists in India they do not fully address the needs of the majority of the population due to lack of accessibility across the country. In order to address this issue, the idea of establishing a pan-India touchpoint payment system was crept up. The Reserve Bank of India had initiated the groundwork for the creation of BBPS under a wide consultative process of study groups, stakeholders, and the general public.
The Bharat QR code is low cost, interoperable mobile-based universal payment solution which enables seamless transactions across banks for American Express, Master Card, RuPay, and Visa cardholders. The bank customers can pay for their purchases at merchant outlets by simply scanning BharatQR using their bank’s app. In short, customers need their bank app or BHIM app installed on their phones
BHIM (Bharat Interface for Money) is an Indian mobile payment App developed by the National Payments Corporation of India (NPCI), based on the Unified Payments Interface (UPI). BHIM is built over the Immediate Payment Service (IMPS) infrastructure and allows the user to instantly transfer money between the bank accounts of any two parties and encourage cashless transactions.
The Cheque Truncation System (CTS) is an online Image-based Clearing System (ICS). In this system of clearing, the collecting bank need not present the physical cheque to the drawee branch. The presenting bank captures the cheque images and Magnetic Ink Character Recognition (MICR) data from end to end precise scanners by using the Capture System. The electronic images of the cheques are then sent to the drawee branch through clearing house with the relevant information like the MICR fields, date of presentation, presenting bank etc. The security, integrity, non-repudiation and authenticity of the data and image transmitted between the presenting bank and the paying bank are safeguarded by the Public
The Clearing Corporation of India Ltd. (CCIL) was set up in 2001 commenced business operations in the securities market on February 15, 2002. CCIL provides institutional infrastructure for the Clearing and Settlement of transactions by banks, financial institutions, and primary dealers, in Government Securities, Money Market instruments, Foreign Exchange, and other related products. The Clearing Corporation plays the key role of a Central Counter Party (CCP) in the government securities, USD –INR forex exchange (both spot and forward segments), and Collaterised Borrowing and Lending Obligation (CBLO) markets.
Electronic Clearing Service (ECS) in bank transaction is a simple, faster and cost effective solution for repetitive bulk transactions. The system was first introduced by Reserve Bank of India in April 1995 to facilitate speedier bulk inter-bank transactions. It is most useful to facilitate repetitive payment transaction such as salary, pension, interest, commission, dividend etc.
National Automated Clearing House (NACH) is a form of Electronic Clearing Service (ECS) which is available with core-banking-enabled bank branches in India. NACH has primarily two variants viz. ECS Credit and ECS Debit. The facility is used by the bank customers for automatic debit to their account every month to pay certain bills like telephone bills, electricity bills, loan installments, insurance premiums, etc.
The credit cards are issued in the form of a revolving line of credit. That is the cardholder will be allowed to operate the card to the extent of the full credit limit sanctioned to him/her on clearing the previous bill outstanding.
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The debit cards are akin to credit cards; the only difference is that the debit card holders do not enjoy credit facility against their card. The card transaction will be authorized for payment only after the debit transaction takes place in the cardholder’s bank account.
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The electronic card issued by the banks can be used only for domestic transactions and usage is restricted to facilitate online/ non-cash transactions. However, Cash transactions may be allowed to overdraft facility provided along with Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts. As per the RBI guidance, the validity period of the card shall not exceed the validity of the facility and shall also be subject to the usual rights of the banks as lenders.
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Kisan Credit card (KCC) is a type of credit card specially designed for farmers as a form of credit for their cultivation and other needs. Banks may choose to issue EMV (Europay, MasterCard, and VISA) chips and RUPAY-compliant chip cards with magnetic stripes and pins with ISO IIN. The farmers can use their KCC to purchase agriculture inputs such as seeds, fertilizers, pesticides, etc
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Smart cards are available in two types i.e. contact smart cards and contactless smart cards. As the name itself explains a contact card requires contact with a card reader and a contactless smart card utilizes radio frequencies or Near Field Communication (NFC) to send information through the airwaves wirelessly.
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Tokenisation is a process by which actual card details masks sensitive card details of your debit / credit / prepaid card with an alternate code. This process by which the primary details of a card are replaced with a surrogate value is called a token.
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Prepaid cards are also known as virtual cards. They are issued by the banks and non-bank entities against the value paid in advance by the cardholder. As per RBI’s circular dated May 19, 2021, it shall be mandatory for PPI issuers to give the holders of full-KYC PPIs (KYC-compliant PPIs) interoperability through authorised card networks (for PPIs in the form of cards) and UPI (for PPIs in the form of electronic wallets) which shall be enabled by March 31, 2022.
National Payments Corporation of India (NPCI) said that it has introduced the RuPay Contactless (Offline) feature. The card comes with a reloadable wallet feature where customers can store money to ensure quick and hassle-free transactions compared to regular credit/debit card transactions. Rupay Contactless is a contactless payment technology that allows cardholders to wave their card in front of contactless payment terminals without the need to physically swipe or insert the card into a point-of-sale device.
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International payment cards like VISA & Master cards have been charging heavily on card payment network services provided by them. With the introduction of RuPay cards, it has been able to provide transaction facilities to the extent of 40% cheaper than international networks. Thus, RuPay’s lower transaction cost helps Indian Banks to rapidly expand their card business to untouched markets of small towns and rural areas.
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National Common Mobility Card (NCMC) was launched in March 2019, with the tagline ‘One Nation One Card’. It is a single combo card offering a combination of a Debit / Credit with a prepaid card. A customer holding an NCMC card needs not to carry multiple cards with him for different purposes. The Debit / Credit component of NCMC would be used in the online environment whereas the prepaid component would be used in the offline environment, wherever offline payments are permitted. Customers may use these cards for payments across all segments including metro, bus, suburban railways, toll, parking, smart city, and retail. The service area feature of this card supports operator-specific applications like monthly passes season tickets etc.
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With the operational functions and services with in-house capabilities, the NFS network is now at par with most of the global ATM networks. Apart from basic transactions like Cash Withdrawal, Balance Enquiry, PIN Change, and Mini Statement, NFS also offers the following Value Added Services (VAS) to the customers of the banks on ATMs/CDMs:
E-money is electronically stored in a domestic currency backed by the regulator. The Payment and Settlement Systems Act in India hold the issuers of e-money responsible for the liability of the amount issued by them.
The individuals who have registered for e-wallet have to link their multiple credit card and bank account numbers in the registered e-wallet.
Buying and selling of goods including digital products* and services through electronic channels such as the internet are called e-commerce. We can identify e-commerce business into two different methods viz. (a) Inventory based model of e-commerce and (b) Marketplace model of e-commerce
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Payments in the online space are facilitated by a number of intermediaries like payment gateways and payment aggregators. These intermediaries act as the conduit between merchant & customer who is willing to pay for the services availed or the goods purchased online.
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Mobile phone banking is a new revolution in banking system around the world. The mobile banking has several advantages; such as you can do internet banking, online shopping, and bills payment, or transfer of the amount to another account in a secure manner. With the advent of mobile phone banking, mobile phones are gradually replacing your wallets, Credit Cards, Debit cards, etc. at any place using your mobile phone buttons.
RTGS& NEFT transactions are the fastest electronic funds transfer systems available in India. Under the above systems, funds can be transferred from a bank by its customer to their own account or third parties having their account with another bank across the country. The RTGS and NEFT transactions are distinguished by the processing time taken by them. In RTGS, the processing of instructions takes place instantly at the time they are received rather than at some later time. NEFT operates in batches on an hourly basis.
If there is one Indian innovation that has grabbed global headlines in recent years, it is undoubtedly the UPI (Unified Payments Interface) payment system. Today, more than 40% of all payments done in India are digital, with UPI having a lion’s share, used by over 30 crore individuals and over 5 crore merchants. (Source: PIB report). Unified Payments Interface (UPI) is a mobile-based, 365x24x7 ‘fast payment’ system. Through UPI, users can send and receive money instantly using a Virtual Payment Address (VPA) set by the users themselves. The unique feature of VPA-based transactions is the secure aspect of UPI architecture as it removes the need for sharing account or bank details with the remitter.
The state-of-the-art payment service *99# works on the Unstructured Supplementary Service Data (USSD) channel. This service allows mobile banking transactions using the basic feature of mobile phones, there is no need to have a mobile internet data facility for using USSD-based mobile banking. The above service is intended to take the banking services to every common man across the country. It is planned to provide financial deepening and inclusion of underbanked society in the mainstream banking services.
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The National Payments Corporation of India (NPCI) has developed the National Electronic Toll Collection (NETC) program to meet the electronic tolling requirements of the Indian market. It provides an electronic payment facility for customers to make the payments at national, state, and city toll plazas by identifying the vehicle uniquely through a FASTag.
TReDS (Trade Receivables Discounting System) is an institutional setup for the flow of finance to micro, small, and medium enterprises (MSMEs) through multiple financiers at a competitive rate. The model outlined for TReDS in the paper envisages its operation both in the primary market segment as well as a secondary market segment as authorised payment system under the Payment and Settlement System (PSS) Act, 2007. The activities of TReDS are also subject to the supervision of RBI.
In the financial space, third-party apps are often connected to a banking application to provide a variety of services.TPAPs are the Application Programming Interface (API) designed in UPI exclusively for banks. The Application Programming Interface (API) is a software intermediary that can be either standalone applications or applications that add functionality to an existing parent program/system.
ISO 20022 (pronounced ‘ISO twenty-oh-twenty-two’) or Universal Financial Industry Message Scheme (also called” UNIFI”) is a global standard for exchanging electronic messages between financial institutions. The ISO 20022 standard covers financial information transferred between financial institutions that include payment transactions, securities trading, and settlement information, credit as well as debit card transactions, and Foreign Exchange transactions, among other financial information.
The SWIFT financial messages are trusted as the most authentic and universal financial messages the world over. SWIFT financial message is also the most convenient and fastest medium through which banks can meet customer’s requirements to send and receive messages to and from any country.
The Structured Financial Messaging System (SFMS) is a secure messaging standard developed by the IDRBT (Institute for Development and Research in Banking Technology) Hyderabad to serve as a platform for intra-bank and inter-bank applications. SFMS is fulfilling the requirements of domestic financial messaging an Indian variety similar to SWIFT (Society for Worldwide Interbank Financial Telecommunications) which is the international messaging system used for financial messaging globally.
An international financial services centre (IFSC) caters to customers outside the jurisdiction of the domestic economy, dealing with flows of finance, financial products, and services across borders. The IFSC brought back the financial services and transactions that are earlier carried out in offshore financial centres by Indian corporate entities and overseas branches/subsidiaries of Financial Institutions (such as banks, insurance companies, etc.) to India.
Money Transfer Service Scheme (MTSS) is the most common channel to transfer personal remittances from abroad to beneficiaries in India up to a limit of USD 2500 on individual remittances for family maintenance. The remittances favouring foreign tourists visiting India are permissible under MTSS. A single individual beneficiary can receive a maximum of thirty remittances under the scheme during a calendar year.
Rupee Drawing Arrangement (RDA) is a way of transferring personal remittances from abroad (overseas jurisdiction) to beneficiaries in India. Under Rupee Drawing Arrangement, the Authorised Category I banks enter into tie-ups with the non-resident Exchange Houses in the FATF compliant countries to open and maintain their Vostro Account. The non-resident Exchange Houses are the companies and financial institutions that are licensed and regulated by the competent authority in the sending country for sourcing the funds from the remitters.
It enables instant fund transfer through modes such as NEFT/ RTGS and IMPS, thus providing safety along with speeding the process of fund transfer.
The Indian Financial Network (INFINET) is a Closed User Group (CUG) Network for the exclusive use of Member Banks and Financial Institutions. It was set up by the Reserve Bank in 1999 through the Institute for Development and Research in Banking and Technology (IDRBT) Hyderabad.
An LEI is a 20-digit unique code to identify parties to financial transactions worldwide. Following the global financial crisis, the Legal Entity Identifier (LEI) code is conceived at the initiative of ‘The Group of 20, financial stability Board’. In the US and Europe, the regulations require the use of LEIs to uniquely identify counterparties to transactions in regulatory reporting.
MICR is an acronym for Magnetic Ink Character Recognition. The technology of MICR is primarily used by the banking industry to facilitate the processing of cheques. The MICR code is located on the bottom of a cheque leaf. The code line in a cheque is the clear White Band portion at the bottom of the cheque which is exclusively meant for MICR (Magnetic Ink Code Recognition) code numbers.
BIN is an acronym for Bank Identification Number which appears on your debit card, credit card, prepayment card, travel and entertainment cards, airline cards, etc. BIN is a numbering convention developed to identify which particular institution issued a given credit/debit or other cards, and what type of institution it is. BIN is also referred to as IIN (Issuer Identification Number/Industry Identification Number) given non-bank institutions that opt into the BIN network.
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