How Digitalization Makes Payments Effortless

May 14, 2021

Digitization of payments has been a step towards achieving an easy, convenient, fast, and secure method to make payments online or offline. India was reported to be one of the frontrunners in adopting digital payment systems, which have spread to many industries in the last 4-5 years.

The digital payment methods also have been constantly evolving and today there are countless ways in India to make payments digitally, like:

1. Net Banking and Mobile Banking

2. Micro ATMs

3. Unified Payment Interface (UPI)

4. Banking Cards

5. Aadhar Enabled Payment Systems (AEPS)

6. Unstructured Supplementary Service Data (USSD)

Let’s look at each of these more closely and see how they work, and what advantages they offer to businesses and their customers.

Net banking and mobile banking

This is an electronic payment system that enables account holders of a bank to make a range of financial transactions through the bank’s official website or mobile application.

Within this, there are different types of transactions:

National Electronic Fund Transfer (NEFT) – NEFT, or National Electronic Funds Transfer is a one-to-one payment facility introduced by the Reserve Bank of India (RBI) across various public and private sector banks, to enable transfer of funds from an individual with an account in one bank to one with an account in a different bank.

Real Time Gross Settlement (RTGS) – RTGS is a way of continuous (real-time) settlement of funds transfers by processing of instructions at the time they are received rather than at some later time; Gross Settlement means that the settlement of funds transfer instructions occurs individually. RTGS payments are generally final and non-refundable. 

Electronic Clearing System (ECS) - ECS is an alternative digital method to make transactions related to utility-bill-payments such as telephone and electricity bills, insurance premium payments, card payments, loan repayments, and so on, faster.

Immediate Payment Service (IMPS) – As the name suggests, this method offers a way for instant electronic fund transfer between accounts of same or different banks across India, through mobile phones.

Micro ATMs

These are devices that are used to make payment transactions by inserting a credit or debit card. The platform will enable shop owners or business owners to conduct instant transactions, and receive payments from their customers through a card. It can be carried around easily and used anywhere, anytime.

Unified Payment Interface (UPI)

UPIs are platforms that allow us to access banking services and features using just an ID (a unique identification for a bank account) or PIN to send and receive money. Bank-to-bank payments can even be made using a mobile number or the UPI ID.

UPIs are one of the most used payment methods today – in shops, malls or even online delivery applications – this has made the money transfer process a lot easier, as people do not have to enter the receiver’s account number, account type, IFSC, and bank name. The money transfer can be done simply by using any of these –

Aadhaar number (of the receiver)

Mobile phone number registered with the bank account


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Banking Cards

These are one of the first digital payment methods introduced. Banking cards offer security, convenience, and control to the user/cardholder. There are a variety of banking cards available – including credit, debit and prepaid, which offer enormous flexibility. These cards use a 2-factor authentication procedure for secure payments, consisting of a secure PIN and OTP. These allow people to purchase products or services from stores, on the Internet, through mail-order catalogues or over the telephone. 

Some examples of banking cards are – Visa and MasterCard.

Aadhar Enabled Payment Systems (AEPS)

This is a payment method which allows online financial transactions at PoS (Point of Sale / Micro ATM) of business owners who are customers of any bank, using Aadhaar authentication.

For this, users need to provide KYC (Know Your Customer) information to open a new account, and their Aadhaar Number should be linked with their bank account. Services such as balance Enquiry, Cash Withdrawals and deposits, Aadhaar to Aadhaar funds transfer, etc are offered by this method.

This method is interoperable across various banks, and can be quickly accessed through Aadhar details and some biometric information. It is safe, secure and hassle-free.

Unstructured Supplementary Service Data (USSD)

This service allows mobile banking transactions using basic features of a mobile phone. There is no need to even have mobile internet data facility for using USSD based mobile banking.

To use this, you need to first provide KYC (Know Your Customer) information to open a new account, and then link your mobile number with bank account. Once that’s done, you need to register for USSD/Mobile Banking, and set MMID (Mobile Money Identifier) and an MPIN (Mobile PIN).

After this is activated, you can simply dial *99# and transact through an interactive menu that will be displayed on the mobile screen. The services included in this are interbank account to account fund transfer, balance enquiry, mini statement, and many more.

Using digital payments will help keep your customers, partners and suppliers happy by considerably reducing the inefficiencies in manual payment processes, and also enable them to purchase from you even in case they do not have the physical cash on them. This benefits your business as well as improve customer satisfaction. So it’s a win-win.