NACHIKET DILIP PAWAR

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DIGITAL PAYMENT ASSIGNMENT
 1. Explain briefly the future of mobile payment as the Electronic Payment
system.

Answer:
Introduction
e-Payment can be defined as a payment service that utilizes the information and communication
technologies including integrated circuit (IC) card, cryptography, and telecommunication
networks'. An efficient electronic payment system lessens the cost of trading and is thought to
be essential for the functioning of capital and inter-bank markets. With the advancement of
technology, electronic payment system has taken many forms including credit cards, debit cards,
electronic cash and check systems, smart cards, digital wallets contactless payment methods and
mobile payments and so on. E-commerce has become a rapidly growing market today. With the
proliferation of tablets and smartphones, the use of electronic payment methods has grown up to
21% in 2012. Other widely used online payment alternatives are debit cards (with rising number
of users worldwide) and online payment systems like Paypal, Stripe or Skrill.

The Future of Electronic Payments

Applications
 According to MEF’s third annual Global Mobile Money report 2015, e-commerce and
mobile banking continue to grow with 69% of mobile users carrying out their banking
activity via mobile devices. The report conducted a study of 15,000 mobile users across
15 different countries of the world. The report defined the term Mobile Money for the
services including in-store payments, carrier billing, online payments, peer-to peer
payments, and payments via mobile wallets.
 As the introduction of smartphones has replaced a several things in our daily lives like an
alarm clock, watch, music player, and tape recorder it seems that cash and wallets are
soon to be added to this list. Payment methods have been through a series of evolutions
from cash to checks, to debit cards and credit cards, and now to ecommerce and mobile
banking.
 One study finds that customers are increasingly using mobile payment methods for their
routine online purchases and for their on-site purchases as well. With growing advanced
technology that supports mobile transactions and makes them transparent and more
convenient, consumers have developed their trust and habits on using mobile payment
systems. The changing behaviour of consumers making a shift from traditional payment
methods to more advanced online payment systems is quite evident in banking and
retailing, and with most of the mobile devices available.
 Since it is evident that the mobile devices became unavoidable part of almost everyone’s
life form one side and the opportunities this technology enables for online and offline
payment regarding convenience and security, it is unavoidable that the use of mobile
payment systems will further rise with ambition to surpass or even replace cash and other
cashless payment option.
 Growing use of mobile payment methods also encouraged developed markets to install
device penetration system and infrastructure that should support mobile transactions in-
store. In addition, contactless payment methods are also becoming popular with their
wearable technology (Sacco, 2015) that offers fast, easy, and a secure way to pay at
various places.
 The wearable payment technology includes smart watches, rings, wrist bands, and a
number of Android or iOS smart phones applications. GSMA State of the Industry report
for 2013 has also displayed some statistics that shade some light on the future of mobile
payments. According to this report, ‘By the mid-2013, there were over 203 million
registered mobile money accounts across the globe with mobile money outlets
outnumbering bank branches in over 80% of markets worldwide’ (Oracle, 2014).
 The rate of mobile payment transactions is increasing remarkably worldwide and their
value is predicted to rise from US$ 12.8 billion (estimated in 2012) to US$ 90 billion by
2017 (Oracle, 2014). These statistics clearly show that we have a cashless future ahead
with more secure and convenient options for making payments via smartphones and
tablets.
Challenges
 Where mobile payment systems have brought new opportunities for merchants and
customers, they have also exposed them to new risks regarding privacy and security
issues. According to a report on mobile payments, careful planning is required to make
security an intrinsic element of online payment methods in future.
 For a prosperous future of mobile payment market, mobile phones manufacturers,
telecommunication companies and payment industry need to collaborate with each other
so that a platform can be developed ensuring the most secure environment for online
payment transactions. However, it is believed that mobile payment systems have the
potential to tackle all of the major security and privacy concerns related to this industry,
and current developments reveal that innovations are already being deployed (Oracle,
2014).
 According to Reddy (2004), the future of mobile payments can be secured by using the
latest technology in order to overcome practical and analytical challenges faced by this
industry. Radio barcodes is believed as to be revolutionary.
 The new research on this aspect concluded that for a promising future of this industry,
mobile payment systems have to be better integrated with present telecommunication and
financial infrastructures. Enhancing the compatibility with a wide range of users, the use
of latest technology and establishment of common standards for various service
providers, and overcoming the security and privacy issues could help in facilitating faster
adoption of electronic payment methods and advance the rising market of mobile
payments.
Q2) Explain the role of various digital platforms in Digital Payment.

Answer:

Introduction
Digital payment platforms have eased cashless transactions, and have been especially popular
since demonetization. These platforms are capable of making payments in online as well as in
offline mode. However, their features differ and you should make the best use of them while
making payments.

Different digital platforms

NFC or MST transmission waves platform

Companies have come up with making transaction through NFC (Near Field Communication)
and MST (Magnetic Secure Transmission) technology. Without swiping your card through POS
(Point of Sales) machines, you can easily make payment to merchants through its wireless
transmitting magnetic waves. You can avail this facility by downloading MST enabled app and
also, your phone should support NFC facility. Once it is done, after registering your card details,
you can make contactless transactions through your phone on any of merchants’ POS terminal.

Sound based payments platform

Some companies have launched app with sound transmission fund transfer facility. Yes, it’s true
this technology is only a software-driven application, and it does not require any hardware
upradation on the ATMs to make use of it. This highly secured application makes you do
contactless transactions through sound waves technology. Once you have downloaded this
application on your smartphone and after registering your cards, this app can make payments
from your phone at any POS machine through sound waves even though you do not have
physical cards along with you. This app also enables easy cardless cash withdrawal to the
customers from ATMs.
Mobile Money Identifier

MMID is a seven digit unique number which issued by the bank once you have registered your
mobile number. A person who wants to send money and the person who wants to receive that
money should have MMID for the particular interbank funds transfer. However, through MMID
you can transfer only a small amount (around Rs 10,000) within a day. Almost all banks are
providing this facility of making small payments.

UPI App based payments platform

UPI has come up with a unique feature of creating virtual address through which you can transfer
money without disclosing your account number and IFS code to the receiver. UPI works on a
real time basis which means the money is transferred instantaneously. UPI also supports the
other medium of doing funds transfer. UPI facility is available with all the banking apps like
HDFC UPI, SBI UPI, ICICI UPI, AXIS UPI, and almost all the other private and public banks.
Now, most of the bank are embedding their UPI feature within their mobile banking app only.

QR Code based payments system

QR code is again a different mechanism of making the transfer of payment where you only need
to scan the QR code of the merchant and do the transfer of payments. It is being mostly used by
all the digital payments app like BHIM, other banking apps to make the transfer of payments
easily. The black square holds the information about the items whereby scanning the code
information gets transmit automatically through the smartphone and payments get done. You do
not have to enter anything manually while using QR code facility. Bharat QR code has been
launched by the government to push the digital payment initiative in all the way round.

USSD code payments system

If you do not have a smartphone or internet facility, still you can make payments through dialing
USSD (Unstructured Supplementary Service Data) code even from your basic phone and
following the certain instruction, you can easily make your payments done. It is GSM-based
technology where transactions take place through messages. It is a platform which forms a
medium between the telecommunication and banking financial services altogether. For every
banking app, you have a different dialing code which you need to check from your service
provider while making the transfer of payments.

Aadhaar enabled payment system

The Aadhaar payment app works on an Aadhaar Enabled Payment System (AEPS) facility,
which is a bank-led model offering you multiple financial services through your Aadhaar
number.You can link multiple bank accounts through Aadhaar Payment Bridge (APB) platform
by which you can make payments from any of your accounts to the merchant. To make the best
use of it, you need to link the Aadhaar number to your bank account.

Net banking payments platform

As the name suggests it simply means get your banking service online. The facility can be
availed through mobile banking too. If you have a net banking access then in such case you may
not have to visit the bank for day-to-day transactions. Net banking helps in payments from
anywhere using your mobile banking app or just by log in to your banking website. It provides
three modes of payments. Firstly, NEFT, which takes time while transferring money. It runs the
process in batches which is why the time consumption is slightly more. If the receiver is not in a
hurry to get funds and the amount is also less than Rs 10,000 individuals can use NEFT because
it carries least service tax. Secondly, IMPS helps in getting funds transferred on real time basis
for up to Rs 2 lakhs. When you need to make the transfer amount for more than Rs 2 lakh, you
can use RTGS facility.

Digital wallet payment system

Through this platform money is loaded in wallets. Similarly with the launch of e-wallets you can
add money using digital wallet apps. However, the constraint is you can transfer fund to the same
wallet only. It means that if you have PayTM or SBI's Buddy app on your phone then you can
only transfer money to another person's PayTM wallet or SBI's Buddy app who is having these
app's installed respectively. Simply in another way round, you cannot transfer money from
PayTM wallet to SBI buddy wallet app. There are some other e-wallets available in the digital
marketplace such as Mobikwik, Freecharge, Oxigen, Reliance Money, Paypal, Buddy, Lime,
Payzapp, Pocket, Yes Pay, etc.

Magnetic stripped cards

These are magnetic strip cards in the form of debit or credit card. People use these cards quite
often for making payments. These cards can provide benefits of reward points per transactionand
other cashback offers. These cards are usually offered by banks which are mainly powered by
VISA or MasterCard.
Q3) The Indian payment ecosystem has undergone a paradigm shift in
recent years, especially in the past two years with the Covid-19
pandemic forever changing how users transact. The estimates show that
2 out of 5 transactions are digital today amounting to approximately
US$3 trillion. The combination of bank account penetration through the
Jan Dhan Yojana program with 440 million bank accounts opened so
far, 1.25 billion Aadhaar-based unique identification numbers enabling
KYC, over a billion mobile devices and low-cost internet accessed by
more than 750 million users have acted as the foundation for the
relentless growth in digital payments, collectively called the JAM trinity
( Jan Dhan, Aadhaar, Mobile) has led to the rapid expansion of digital
payments in India.
a. Discuss some of the key factors which have revolutionized digital
payments in India
b. Discuss advantages and disadvantages of digital payments system.

Answer.
a)Factors which have revolutionized digital payments in India

 Straightforward and Convenient to Use

o Today, the market is crowded with different electronic payment modes. UPI,
mobile wallets, and Pay Later services are relatively easy to use with less hassle
and reduced processing time. As a result, digital payment systems spread like
wildfire among the customers. UPI, for instance, was introduced only in 2016,
and almost every other mobile device today has at least one UPI application
installed.
o As digital payments are deposited in the banks directly, merchants are eased with
the burden of visiting the bank to deposit cash or cheques. As a result, both labor
 and administrative costs can be reduced. In addition, shorter cash-out times
improve the cash flow of the business and ensure smooth operations.
 Improved Internet Connectivity
o Internet coverage and connectivity have improved by leaps and bounds in the last
few years. There was a time when even the metropolitan cities in India had to
cope with poor 2G or 3G internet connectivity and speed. However, the coverage
has percolated to many rural villages today. Not to mention the drastic fall in
internet prices. Along with that, smartphones and gadgets for online payment
have become more accessible and affordable. These changes have made it
possible for small and mid-sized businesses to accommodate the operational cost
of digital payments.
 Increased Awareness
o As smartphones reached the hands of more Indians, especially in the rural areas,
they got exposed to the dynamic and streamlined ways of dealing with operations.
They became aware of the offerings of the online world and how it can simplify
things considerably. Millennials and Gen-Zs practically grew up with technology
and got inclined towards them. Small merchants also became aware of the
benefits the best online payment gateways can offer.
 Government Push
o In an attempt to curb black money and tax evasion cases, the government is taking
several steps to encourage digital payments. For example, under the banner of the
Digi-Dhan-Abhiyan campaign, the government conducted several workshops and
awareness drives to promote digital payments among customers, traders, and
merchants. The government also launched a scheme to apply a lower income-tax
rate on digital turnover for small businesses up to a cap of two crore Indian
rupees.
o Demonetization can be attributed as the primary stimulator that prompted digital
payments. As the availability of cash decreased, merchants realized that they
would face losses if they didn’t upgrade their business to online payments.
Likewise, customers could no longer rely on cash for shopping.

 Improved Accounting and Management

Using an online payment gateway comes with several perks for the merchant.
Bookkeeping and accounting for all transactions is significant labor and time-
consuming activity. Gateways can automate the process to great lengths. Manual
entry of transactions can be replaced with digital transaction statements from the
gateway service.

 Easier Onboarding and Integration

Merchants no longer need to worry about the lengthy and overly complicated
gateway onboarding processes. At Zaakpay, it takes less than twenty-four hours to
activate a merchant account. Integrating the gateway is also a straightforward task
with Zaakpay’s pre-built plugins that support most website platforms.
 b)
Advantages of digital payments
1. User-friendly:
These services are easy and convenient. They have an easily understandable interface so
as to reach more audience. Almost all the services of digital payments have a support
team to provide continuous support to the customers.
2. Discounts from taxes:
The government announces many schemes and discounts from time to time so as to
encourage this service. Several exemptions are also available for digital payment users,
like exemption from service tax, etc.Send or receive money from anywhere: Digital
transactions can be done from anywhere and at any time. This facility is available
24*7 and for 365 days. However, the necessities should be kept in mind while making
such transactions depending upon the type chosen for the payment.
3. Less involvement of risks:
Digital payments are secured enough with different authentication techniques to avoid
any misuse or fraud. Some offer two-factor authentication, whereas others offer OTP
authentication and the like. As soon as the transaction becomes successful, the user gets a
notification for it either on mobile or on email or both. Furthermore, a virtual wallet
cannot be forgotten like the traditional wallets and cannot be robbed as well.
4. Digital record:
Cash spending generally does not involve any records. On the other hand, digital
transactions do have a record every time for all types of transactions. This helps to
maintain the records and track spending easily.

Disadvantages of digital payments

1. Restrictions:
Each type of payment system here has its own restrictions in terms of maximum
transactions allowed in a day, maximum amount that can be carried in the account and
the like. An individual will have to take care of these constraints while making any
financial transaction.
2. Necessity of internet access:
Except USSD service, all other payment types require an active Internet connection to
make any transaction. Transactions are also dependent on the network connectivity. In
other words, if there is a poor connectivity, then the transaction will not be successful.
3. Complex for non-technical users:
Most of these services involve the use of mobiles, Internet and cards. This makes it
difficult and challenging for non-technical users and older people to operate the services.
Moreover, some payment systems provide only few minutes to complete a transaction,
which makes it a difficult task for techunsavvy people.
4. risk of data theft:
Although the threat is minimal if the user follows the security guideline, a risk of
personal data leakage is always there. This can result in an identity theft. Where there is
digital media, there involves a risk of hacking the server which can lead to data theft.
5. Budget deficit:
When we carry limited cash in the pocket, we spend that much only. However, making
payments directly from digital wallets or bank accounts removes the budget line from the
system and results in overspending.
6. Storage of anonymous data:
While making the payments, the payment system stores all the data used related to the
amount transferred, time of the transaction, sender’s personal details, recipient’s details,
etc. in the database. This depicts that the intelligence agency has access to all the records
which may or may not be harmful for the users.