Types of Digital Payment Methods and How Businesses Can Efficiently Use Them

Digital payment methods

India’s steadfast migration to digital payments is evidence of its progress towards becoming a cashless economy. The recent years have witnessed several factors and occurrences that have collectively driven this transformation.

Internet and mobile penetration, the pandemic shifting commerce offline to online, robust digital infrastructure, ease & convenience, and multiple digital payment methods are some of the aspects that have facilitated the change.

The volume of digital payments in India has increased by 33% year-on-year (YoY) during the financial year 2021-22. A total of 7,422 crore digital payment transactions were recorded during this period, up from 5,554 crore transactions seen in FY 2020-21.

For an online business, it is essential to be a part of this cashless ecosystem to ensure continued growth in the online space. And one of the primary ways to offer seamless digital payments to your customers is by the inclusion of various digital payment methods.

This article talks in detail about the different types of electronic payments systems and the role of a payment gateway in enabling them for businesses.

What are the different digital payments methods?

Cashless India which is the flagship program of the Government of India includes ten types of payment methods. Here’s a look at them in detail.

1. Unstructured Supplementary Service Data (USSD)

Unstructured Supplementary Service Data (USSD) has been introduced to ensure the wider inclusion and reachability of digital payments. This service allows users to transact through mobile without an internet connection and by dialling *99# on any feature phone.

The interactive menu displayed on the phone offers interbank account to account fund transfer, balance enquiry, mini statement and so on. It is necessary for the user to link their phone to the bank account in order to use this method.

This direct-to-consumer service brings together two diverse sectors – banks and telecom service providers with the aim of making digital transactions available for everyone.

2. Banking Cards

Banking cards are the credit, debit and prepaid cards being widely used by customers for digital payments. Banking cards have an authentication system in place through a pin and a one-time password for secure transactions.

RuPay, Visa and Mastercard are some of the card payment networks that facilitate banking cards. Transacting through a banking card requires a PoS terminal or a payment gateway. 

Apart from transacting, both online and offline, the cards can be used at ATMs to withdraw cash as well. International cards allow users to transact across the globe with multiple currencies.

Customers usually have a transaction limit on the cards which is based on credit ratings determined by the banks. 

3.Unified Payments Interface (UPI)

One of the most widely used digital payment methods in India, Unified Payments Interface (UPI) brings together multiple bank accounts and their features on a mobile application. Users can link their bank accounts and transact using their preferred account through the app.

UPI has significantly simplified bank transfers when compared to other popular options such as NEFT, RTGS or IMPS. 

Unified Payments Interface used a virtual id as a unique identification to transfer and receive money eliminating the need to recollect and enter bank details each time.

Unified Payments Interface (UPI) saw its highest ever number of transactions in April 2022 at 5.58 billion, amounting to Rs 9.83 trillion.

Did You Know – Paytm Payment Gateway does not charge its merchants an MDR on payments received through UPI.

4. Aadhaar Enabled Payment System (AEPS)

This method allows the digital transfer of money between two accounts that have been linked to the respective Aadhar numbers. It is a bank-led model and uses the vast reach of Aadhaar to facilitate digital payments.

Users do not need to visit a bank for transfers and a business correspondent (bank mitra) usually assists in the transactions through Micro ATMs via Adhar authentication.

The other services offered include balance enquiry, cash withdrawal and cash deposit. The transaction limits vary and are defined by the banks.

5. Prepaid card

A bank prepaid card is a debit card that is usually pre-loaded with a specified amount for a single use and not linked to the bank checking account. Unlike a credit card, the user can only spend what has been added to the card in advance.

When the balance has been used, the card can be reloaded online, or at an ATM. The common use of a prepaid card is for gifting, corporate rewards and so on. 

A user can create a prepaid card through the bank’s website with a KYC-compliant account.

6. Mobile Wallets

Mobile wallets are the same as physical wallets except that cash is carried digitally. Users can link their bank accounts to mobile wallets to seamlessly add and use money from the wallet.

Mobile wallets are offered by banks as well as private companies. Paytm Wallet for instance is widely used by customers across India for digital payments. Wallets often incentivise the user with cashbacks and offers on the transactions.

Mobile wallets also allow users to scan barcodes and instantly initiate payment.

7. PoS (Point of Sale)

PoS(Point of Sale) is primarily the location where sales are done. This means a specified area or a checkout counter where billings are done. 

However, tech advancements have introduced the PoS machine which can be used anywhere to make a payment with the help of a debit or credit card.

PoS machines can even debit money (up to INR 2000) without the need for a pin through their contactless reader. PoS speeds up the transaction time, especially at places with long checkout queues. The result is fast & efficient transactions and a seamless customer experience.

8. Internet Banking

Internet banking has been one of the oldest methods around for digital payments and involves transacting through the bank’s website. Users can log in through their customer ids and access all their bank details online. 

NEFT, RTGS, and IMPS are the most well-known methods used while sending and receiving money through internet banking. Transferring funds through internet banking requires an account number, IFSC code and other details of the receiver.

Internet banking is also a common method for online payments and is enabled with the help of a payment gateway.

9. Micro ATM

Micro ATM is a device that is connected to banks and helps in online transactions at places where banks and ATMs may not be available. It is usually handled by business correspondents that are assigned by banks to conduct basic transactions. 

The correspondents could be small shop owners who can parallelly manage banking activities for their customers. They almost act like a bank and are supposed to give cash when withdrawn and deposit it when handed over. 

Micro ATMs can be used for financial activities through bank accounts that must be necessarily linked to the Aadhaar number. The services include withdrawal, deposit, enquiries and transfer of money.

10. Mobile Banking

Mobile banking is more of an extension of internet banking where users can transact through the bank application by downloading it on their mobile phones. 

Considering the increasing penetration of mobile devices in India, mobile banking is a more accessible and convenient method for users than internet banking.

Mobile banking also offers digital payment methods such as  IMPS, NEFT, and RTGS for transactions and transfers of money.

How Paytm Payment Gateway Helps Businesses with Seamless Digital Payments

Paytm Payment Gateway helps businesses ensure seamless and instant transactions on their website/app.

When customers make payments on your website through either a banking card, UPI, internet & mobile banking or a mobile wallet, Paytm Payment Gateway accepts those payments and initiates complex processes to complete the transactions within minutes. 

It can process up to 3000 transactions per second – higher than all major payment gateways put together. Paytm Gateway also uses its in-house infra – Paytm Payments Bank to facilitate transactions.

Additionally, here’s how it simplifies digital payments

Quick integration: Complete online onboarding process with powerful APIs and custom SDKs and minimum documentation. 

Multiple payment options: Several types of payment modes including credit cards, debit cards, net banking, EMIs, and UPI, along with Paytm Wallet and Paytm Postpaid.

Merchant discount rate: Zero MDR for payments done through UPI and RuPay cards. 

Fastest settlements: Default T+1 settlements even on weekends or bank holidays. 

Data safety: PCI DSS Level 1 compliant with a dedicated team of 200 cybersecurity experts 

International payments: Supports 100+ currencies without the need for separate API integration. 

The digital transformation will only see more and more advancement over the coming years. Businesses need to equip themselves with the right tools and services to be an active part of the digital ecosystem.

With 99.99% uptime, Paytm Payment Gateway is one of India’s most reliable and robust gateways helping businesses adopt and enable the multiple types of digital payment methods on their websites.

 

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