Electronic Payment Systems (EPS) in India refer to digital methods of transferring money between individuals, businesses, and financial institutions without using cash or paper-based instruments like cheques. These systems have transformed how transactions are conducted, making payments faster, safer, and more efficient.
What is Digital Payment?
Digital payments are transactions that occur via digital or online modes. This means both the payer and the payee use electronic mediums to exchange money.
The meaning of digital payment is equivalent to an electronic payment. Digital payments use a digital device or platform to move money between payment accounts. They can be partially, primarily, or fully digital.
Digital payments can take place through the Internet as well as on physical premises. Some examples of digital payments include buying something from e-commerce platforms and paying for it via UPI (unified payments interface) qualifies as a digital payment. Similarly, if you purchase something from your local grocery store and choose to pay via any other payment method, that also is a digital payment.
Types of Digital Payments In India
1. Banking Cards: Banking cards are the most widely used digital payment system in India. It offers a great set of features that provides convenience as well as security to the users. Cards offer the flexibility of making other types of digital payments. Customers can store card information in the mobile application and pay for the services using the stored card information.
Banking cards (debit and credit cards) can be used for a variety of digital transactions like PoS terminals, online transactions, as a payment medium in mobile apps, which provide any kind of service like grocery, healthcare, rental cab booking, flight tickets, etc.
The most popular cards are issued by service providers like VISA, MASTERCARD, RuPay, AMEX etc.
2. USSD ( Unstructured Supplementary Service Data): USSD is another popular digital payment method. It can be used for carrying out cashless transactions using mobile, without the need of installing any banking app.
The good thing about USSD is that it works without the requirement of mobile data. The main aim of this digital payment service is to include those sections of people of the society who are not included in the mainstream.
The striking feature of the USSD is that it can be availed in Hindi. The USSD can be used for the following types of activities:
a. Initiating fund transfers
b. Making balance enquiries
c. Getting the bank statements
3. AEPS (Aadhaar enabled payment system): AEPS can be used for all the following banking transactions such as balance enquiries, cash withdrawal, cash deposit, aadhaar to aadhaar fund transfers. All such transactions are carried out through a banking correspondent which is based on Aadhaar verification.
This service can be availed if the aadhaar is registered with the bank where an individual has a bank account.
4. UPI (Unified Payment Interface): UPI is the latest digital payment standard where the user having a bank account can transfer money to any other bank account using UPI based app. UPI enabled payments occur throughout the day and all 365 days in a year.
Payment can be done using a Virtual Payment Address (VPA). To use UPI services one must have a bank account and a mobile number registered with that bank account.
5. Mobile Wallets: Mobile wallets are another popular payment option. Here the users can add money to their virtual wallet using debit or credit cards and use the money added in the wallet to perform digital transactions.
Some of the most popular mobile wallets are PayTM, Mobikwik, PhonePe, etc.
6. Point of Sale Terminals: PoS terminals are installed in shops or stores where payments for purchases can be done through debit and credit cards. There are variations of PoS, one which can be Physical PoS and the other one is mobile PoS. The mobile PoS does away with the need of maintaining a physical device.
7. Mobile Banking: Mobile banking is a service provided by the banks through their mobile apps in a smartphone for performing transactions digitally. The scope of mobile banking has expanded extensively after the introduction of UPI and mobile wallets.
Mobile banking is a term used to describe a variety of services that are availed using mobile/smartphones.
8. Internet Banking: Internet banking is the process of performing banking transactions from the comfort of your home using a mobile phone/laptop/ desktop and an active internet connection. The major type of transactions can all be done using internet banking.
Benefits of Digital Payments
- Transactions performed through digital payments systems are faster, easier and more convenient than traditional banking transactions performed physically by visiting the branch.
- DIgital transactions are cheaper than the traditional payment system.
- Digital payments are more rewarding as individuals can get access to a variety of coupons and freebies for performing digital transactions.
- The digital transactions leave behind a definite track of the complete transaction which is helpful to trace payments.
- Digital payment systems such as PayTM help in payment of electricity, broadband, gas and recharges for phone and DTH.
FAQs
What is UPI, and how does it work?
UPI (Unified Payments Interface) is a real-time payment system developed by the National Payments Corporation of India (NPCI). It enables users to link their bank accounts with a mobile application and make instant payments by using UPI IDs or QR codes. Payments are processed instantly without the need to enter bank details every time.
What are electronic payment systems?
Electronic payment systems are digital methods of transferring funds between buyers and sellers without the use of physical cash or checks. These systems include online banking, mobile wallets, UPI (Unified Payments Interface), credit/debit card payments, and digital wallets.
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