Payment ecosystems in India have traditionally been dominated by cash deposit or through cheques. But with internet and software technology penetration, Indian businesses have shifted gears towards digital payment modes to increase efficiency and enable automation.
There are various modes of payment technologies like IMPS, NEFT, RTGS, UPI etc., Digital technology has enabled payment transactions to be much quicker and super efficient, enabling customers, merchants, and vendors to send and receive payments in real-time.
Why India is opting for digital payments?
- Convenience – Digital payments have made it more convenient. Right from utility bill payment to buying a public transport ticket with an e-wallet. Digitally, you can pay for anything down to the exact amount.
- Enhanced Security – Digital payments has one of the most advanced security measures for payment transactions. Additional Factor of Authentication (AFA) and real-time transaction alerts were the first few steps. This was enhanced further with biometric/Aadhaar-based authentication and robust fraud mitigation measures.
- Better Customer Experience – With one single access to bank accounts and payments, people are encouraged to use digital payments by offering more cash back and discounts. More the transactions, more the discounts and cashbacks.
Let’s take a look at India’s fast-changing digital payments ecosystem
Unified Payment Interface – It is an open architecture platform that has the potential to change the way customers deal with their payments. The UPI set-up recommends combining all facilities from Immediate Payment Service (IMPS), Automated Clearing House (ACH) to RuPay into one common stand. The in-built open architecture will provide access to all payment service providers (PSPs), right from banks, FinTechs, payment banks etc., Customers will be able to pick a virtual address in any format (mobile number, Aadhar card, email address, etc.) This is estimated to enhance user experience and empower PSPs to offer easy and simple payment solutions. It is also likely to facilitate several use cases on the UPI platform – comprising a peer to peer payments, person to merchant payments and business to business payments.
Key Benefits of using UPI:
- One UPI App Many Accounts – After the UPI mobile app, you do not need multiple apps for multiple bank account. A single UPI would serve for many bank accounts. You can link many bank accounts in a UPI based app. Because of the multiple accounts at one place, you can pay by using any of the account. You can also set the default account for the payment.
- No Personal Details Required – The payment through the UPI does not require the card details or bank account details. You have to only give the virtual payment address. the virtual payment address is similar to our email ID
- Lower Transaction Cost – The UPI is the cheapest method of fund transfer. The NEFT charges minimum Rs 2.5 for a transfer, the IMPS charges minimum Rs 2.5. But the UPI charges too less to believe. It costs less than 50 paise for a transaction through the UPI.
Rupay – Initiated by National Payments Corporation of India, it was done with the intention of integrations of payment systems in the country. It is an Indian version of a credit/debit card. RuPay debit cards are similar to any other debit cards and can be accessed in ATMs & POS terminals across the country. The card also comes with a high-end technology chip, especially for high-end transactions. It also has an embedded microprocessor circuit with information about the cardholder.
Key Benefits of using RuPay:
- Lower transaction cost – International transactions lead to higher transaction costs. Such costs can be reduced by using the RuPay card. Also, transactions will be faster.
- Reduced processing fees – Since processing will be done within the country, processing fees for RuPay card compared with regular debit/credit cards will be considerably lower.
- Accidental Insurance – All RuPay ATM-cum-debit cardholders are presently eligible for accidental death and permanent disability insurance cover. RuPay Classic cardholders are eligible for a cover of Rs 1 lakh, whereas RuPay Premium cardholders are eligible for the cover of Rs 2 lakh. The insurance premium is paid by the National Payments Corporation of India.
Conclusion – Having mentioned all the above, the market for digital payments in India is promising. The use-cases, customer propositions, and business models, the scenario is rapidly changing and evolving and the Indian payment industry is destined to grow multifold in the coming decade.