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Digital Payment System & UPI Payment Gateway

UPI is the latest innovation in Digital payment world. UPI refers to electronic consumer transactions, which include payments for goods and services that are made over the internet, mobile payments at point-of-sale (PoS) via smartphone applications (apps), and peer-to-peer transfers between private users.

UPI Payments a way of payment which is made through digital modes. In digital payments, payer and payee both use digital modes to send and receive money. It is also called electronic payment. In the digital payments, no cash is involved. All the transactions in digital payments are completed online. It is an instant and convenient way to make payments. Digital payments save you from long queues of ATMs and banks as in case of cash you need to withdraw from ATMs.

What are UPI Apps?

UPI or Unified Payment Interface is a payment mode which is used to make fund transfers through the mobile app, and this payment system works on the mobile platform. One can transfer funds between two accounts using UPI apps. There is no requirement of giving the bank account details for the fund transfer through the UPI payment system. UPI is one of the most advanced methods of all the digital payments.

Using UPI App

One needs to download a UPI app and create a VPA (Virtue Payment Address) or UPI ID. Every user of UPI app must have a unique ID which is known as VPA. There are many UPI apps available such as BHIM, SBI UPI app, HDFC UPI app, iMobile, Phone app, etc. It is not mandatory to use the UPI app from your bank to enjoy UPI service. One can download and use any UPI app.

By using VPA or IFSC and account number, UPI apps are a faster solution to send money. But they have some limitations also. Lack of stable internet connection can cause trouble for these apps.

Digital Payment System: Benefits of UPI

• The UPI transfers the fund immediately. No restriction on holiday or working hours. The bank strike will also not affect the UPI payments.
• It makes one free from cash transactions.
• One does not require providing the bank account number and IFSC code.
• One can transact from many bank account through a single UPI app.
• One is not required to wait up to 24 hours to send money to a new payee. Anyone would get money immediately.
• Through money collection facility one can send bills and get money once the client approves it.
• The United Payments Interface (UPI) envisages to be a system that powers multiple bank accounts onto a single mobile application platform (of any participating bank).
• Merges various banking features ensure seamless fund routing and merchant payments and facilitate P2P fund transfers.

Send Money through the UPI App

To send money through the UPI app, you have to go through these steps.

• Open the UPI app using the passcode. The Passcode is mandatory to open the app.
• Click on Send money. Choose the bank account from which you want to send money.
• If you have linked one account, you are not required to accept. When you send money using BHIM app, you would not see this option because it links only one bank account at a time.
• Select the receiver, and one can choose a receiver using the VPA as well as the bank account number and IFSC code. So, it is better to get the VPA of money received.
• Add the VPA, if it is not already added.
• Enter the amount and send the money. Before the final confirmation, you have to get into the MPIN. According to the BHIM app, it is termed as the UPI PIN.
• The money immediately gets credited to the account of the recipient.

What is AEPS?

AEPS is an Aadhaar Enabled Payment System which uses the 12-digit unique Aadhaar identification number to allow bank-to-bank transactions at PoS (Point of Sale) machines. It means the money you pay will be deducted from your account and credited to the payee’s account directly. Customer needs only his or her Aadhaar number to pay to any merchant who needs to be linked to the bank account to use AEPS.  Unlike cards and USSD, AEPS does not have any charges on transactions

AEPS services include balance inquiry, cash withdrawal, cash deposit, and Aadhaar to Aadhaar fund transfers. This system does not require a signature, bank account details or any password. It uses your fingerprint as a password. No one can forge your fingerprints. Thus it is the most secure digital payment mode.

What is USSD?

USSD banking or *99# Banking is a mobile banking based digital payment mode. USSD Stands for Unstructured Supplementary Service Data based mobile banking.

One does not require having a smartphone or internet connection to use USSD banking. One can easily use it with any standard feature phone. USSD banking is as easy as checking your mobile balance. One can use this service for many financial and non-financial operations such as checking balance, sending money, changing MPIN and getting MMID. The *99# code works as a bridge between your telecom operator’s server and your bank’s server. It uses your registered mobile number to connect to your bank account. Hence, dial *99# with your registered number only. USSD banking has a transaction limit of Rs. 5000 per day per customer. RBI has also set a maximum charge of Rs. 2.5 per operation.

What is Card based Digital Payment System?

Banks provide cards to their account holders. These have been the most used digital payment mode till now. Many of us use cards for transferring funds and making digital payments. Credit cards, debit cards, and prepaid cards are the main types of cards. One can also use Rupay debit card for digital payments.

• Credit cards are issued by banks and some other entities authorized by RBI. These cards give you the ability to withdraw or use the extra money. Credit cards are used for domestic as well as international payments.
• Debit cards are issued by the bank where you have your account. You can use these cards for making transactions from your account. The payments you make with these cards debit from your account and credit immediately to the payee’s account. You can use these cards to make payments to one bank account to another.
• Prepaid cards are another type of cards which you use to pay digitally. You must have to recharge these cards before using just like prepaid SIM cards.

Cards are one of the best modes when you pay at portals or E-commerce sites. But if we talk about paying to merchants it is not the most suitable way. It charges 0.75% – 2.0% on transactions. Also, you cannot use cards to pay if the merchant does not have a PoS (swipe) machine.

What are E-Wallets?

E-wallet or mobile wallet is the digital version of your physical wallet with more functionality. You can keep your money in an E-wallet and use it when needed. Use the E-wallets to recharge your phone, pay at various places and send money to your friends.

One can use E-wallets to make payments if they have a smartphone and a stable internet connection. These E-Wallets also give additional cash back offers. Some of the most used E-wallets are State bank buddy, PhonePe, GooglePay, Paytm, etc.

Advantages of Digital Payment 

The advantages of Digital Payment include the following:

• It is easy and convenient to use as all the transaction can be done cashless. Hence one needs to use his/ her mobile phone or Aadhaar number or a card to pay.
• Pay or send money from anywhere.
• Discounts on taxes.
• Written record.
• No one can use your money without MPIN, PIN or your fingerprint in the case of Aadhar. Hence it is less risky.

Digital Economy for Youth

With the help of digital payment, it is an opportunity to bring social change. With each passing generation one can sense that everyone is becoming more advanced in terms of technology. The youth of today are vying for a digital economy where they want to do their daily businesses of life digitally.

Youth prefer digital payments system as there can be a greater transparency in the system. It is expected that transparency part in the payments system would be much more that’s why they are more likely to use it.  Other reasons include its convenience and the fact that one can pay anytime and from anywhere.

Drawbacks of Digital Payment System

There are certain drawbacks of digital Payments method that can’t be ignored. Some of them are as follows:

• As most of the digital payment models are based on mobile phone, internet and cards hence, this mode can be difficult to use by non-technical persons.

• There can be a risk of data theft associated with the digital payment as hackers can hack the servers of the bank or the E-Wallet which one is using and can easily get the personal information which can be used to steal money from your account.
• One keeps restricted cash in your physical wallet and thinks twice before buying anything. But if one uses digital payment modes then one can have all the money always which can result in overspending.

Conclusion

Digital payments are more convenient than cash payments. You do not need to carry a lot of cash with you all the time. You can make digital payments in seconds. You will also have all your payments recorded automatically. We all love simplicity and ease. Hence, we can say that Digital payment system is the future of fund transfer and money transactions.

Read our article: RBI Unveils New type of Semi-Closed Prepaid Payment Instruments (PPIs)