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Digital Payments
By Vivek Chinnaiah
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
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.
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.
 Digital 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.
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.
Based on data from RBI – here is growth in
Digital Payments in India over the past 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
Customer Journey in Banks:
The Reasons 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
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:
Unified Payments Interface(UPI)is a system that powers multiple bank accounts into a single
mobile 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
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.
Mobile wallets:
 Google pay
 Phone pay
 BHIM UPI
 PayTm
 And many more
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 Theft: 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.
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
Barriers for Digital Payments in India
 ILLETRACY is the biggest problem in India. Inrural 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 physicalcash
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..

Thank You

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Digital payments

  • 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.  Digital 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 past 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
  • 8. The Reasons 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: Unified Payments Interface(UPI)is a system that powers multiple bank accounts into a single mobile 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:  Google pay  Phone pay  BHIM UPI  PayTm  And 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 Theft: 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. Inrural 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 physicalcash 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..