Modes of payment in commerce in India

A project submitted to university of Mumbai for partial completion of the degree of bachelor of management studies
Under the faculty of commerce

By

A project submitted to university of

Apurva Ramdas lonkar
Under the guidance of
• Miss Rachana chawla
D. G. Ruparel college of arts, science and commerce, Matunga Mumbai
2018-2019

Mumbai for partial completion of the

degree of bachelor of management
studies
• Under faculty of commerce
•

• n
•
 Modes of payment in commerce in India

A project submitted to university of Mumbai for partial completion of the degree of bachelor of management studies
Under the faculty of commerce

By
Apurva Ramdas lonkar
Under the guidance of
Miss Rachana chawla
D. G. Ruparel college of arts, science and commerce, Matunga Mumbai
2018-2019
Apurva Ramdas lonkar the student of tybms semester
6 (2018-2019) hereby declare that I have completed
the project on modes of payment in ecommerce in
India. The information submitted is true and original
to the best of my knowledge.
 Certificate
This is to certify that ms. Apurva Ramdas lonkar
roll no.M 2152 of third year bus semester 5 ( 2018-2019) has
worked and duly completed the project work for the degree of
bachelor of management under the faculty of studies completed
the project on modes of payment in e-commerce in India under
the guidance of prof. Rachana chawla.

Principal,
Course Coordinator.
nclusion of this project work in the course curriculum of the bachelor of
management studies programme is one of the ambitious aspects in the
programme structure. The main objective of the inclusion of project
 Objective
• The main objective of the project is to show the
growth of electronic payments in India
• To find the problem areas in the above topic
• To understand working of various Electronic
Payment System based applications. 
•
Executive summary
 Evolution of
payment modes in
e-commerce in
E-commerce has led to a parallel growth in the payment
gateway market in India. Payment gateways are the key

India
solution for all transactions done online and are
responsible for taking care of all payments safely and
securely. This segment is going to mature and rise up at
an annual growth rate of 61% and reach a big 40 billion
dollars by this year end.
In India, these numbers saw a record jump after the
government demonetized high currency notes (Rs 500
and 1000) – which counts to 86% of India’s cash in
IN India, retail market composition in 2012 was 92% in unorganized sector and 8% in organized sector, of which only 0.2%
was online. In 2013, this composition stood at 9.1%, 8.7% and 0.3%. E‐commerce is a small sliver of Indian retail.7
Therefore, there is tremendous scope for increased share in the online segments, particularly when government is targeting to
ensure that every Indian owns a smartphone by the year 2019. The main objectives of the Digital India programme of the
Government of India are (i) to ensure that every Indian citizen is digitally connected to the government, and (ii) use the
smartphone as a tool for empowering Indians (for doing online retail transactions and providing various other services).8 The
prospect of buoyancy in e‐retail is enhanced by the fact that the working women segment has been growing; in 2013 it
constituted nearly 10% of active internet users. Women have traditionally influenced the domestic buying patterns in India,
particularly among the mobile middle income groups. The e‐retail entrepreneurs are bringing forward more and more products
such as baby care, artificial jewellery, home decor, fashion wear and fashion waves and with positive effects on this segment
of business. Percentage of young people in the total population of India is another factor that positively contributes to the e‐
commerce segment
An e-commerce payment system facilitates the acceptance of electronic payment for online transactions. Also known as a
sample of Electronic Data Interchange (EDI), e-commerce payment systems have become increasingly popular due to the
widespread use of the internet-based shopping and banking.
An e-payment system is a way of making transactions or paying for goods and services through an electronic medium,
without the use of checks or cash. It’s also called an electronic payment system or online payment system.
 Introduction
I
Payment gateways get their revenues from the merchants to whom they provide these services. In turn the Payment Gateway has to
share some of its merchant fee with the banks and payment systems companies Some time , such as in Cash on Delivery transactions,
the  payments are made directly from the consumer(Buyer) to the Merchant (Seller) that a product or service is being provided. Direct
transactions between the buyer and seller do not involve the payment gateway and as such the payment gateway is not a party to the
transaction nor does it get revenues from such transactions. Amongst the several payment gateways in India, some well known
payment gateways that are  widely used include CCAvenue & Tech Process. Pay by Amazon has also recently launched its service.
Payment Gateways that act between the bank and the merchant are able to provide efficient services and for that reason the
transaction cost is loaded with the additional costs of the Payment Gateway.  Payment gateways, however, provide a safer platform
for the money exchange to take place as there are lesser chances of being harmed by fraudsters as the Payment Gateway would
usually have its own fraud protection system that protects merchants from such liability. 
Despite widespread use in North America, there are still a large number of countries such as China and India that have some problems
to overcome in regard to credit card security. In the meantime, the use of smartcards has become extremely popular. A smartcard is
similar to a credit card; however it contains an embedded 8-bit microprocessor and uses electronic cash which transfers from the
consumers’ card to the sellers’ device. A popular smartcard initiative is the VISA Smartcard [4]. Using the VISA smartcard you can
transfer electronic cash to your card from your bank account, and you can then use your card at various retailers and on the internet.

There are companies that enable financial transactions to take place over the internet, such as Stripe for credit cards processing, 
Smartpay for direct online bank payments and PayPal for alternative payment methods at checkout. Many of the mediaries permit
consumers to establish an account quickly, and to transfer funds into their on-line accounts from a traditional bank account
(typically via ACH transactions), and vice versa, after verification of the consumer's identity and authority to access such bank
accounts. Also, the larger mediaries further allow transactions to and from credit card accounts, although such credit card
transactions are usually assessed a fee (either to the recipient or the sender) to recoup the transaction fees charged to the mediary.
 Various types of payment in commerce

The various forms of payment for

ecommerce are given in the following
paragraphs: 
Credit cards – The easiest form of electronic
money that is available and most widely used
today. There are several  million credits cards
that are being used to make online payments
in India. Many international sites and mobile
commerce sites allow you to pre-store your
credit card number securely so that you don’t
have to key in the number each time.
Currently, the largest user base in e-
Mobile Money – Out of India’s 1.2 billion people, only a small percentage have bank accounts. Amongst that massive unbanked
population, many hundreds of millions have mobile phones, and for them, mobile money is likely to be hugely beneficial. Even for
smaller transactions, where credit cards are not accepted, it might be simpler to just hand over cash. But if you don’t have sufficient
cash, then mobilemoney becomes useful. However, mobile money would be convenient to buy a movie ticket or pay your utility bills
on your phone, where otherwise you might have to key in your entire credit card number, CVV number, etc, every time you make a
payment. It’s meant for transactions between Rs 50 – Rs 500 to buy things like games, music, ebooks, and virtual goods in games,
and where people may not want to use credit or debit cards  In India, this is a developing payment option and still evolving in terms of
regulations and guidelines. As on date the main method to pay for products using your mobile is still linked to your bank account.
Payments using mobile carrier billing ie where your payments are deducted from your mobile prepaid balance or billed to your
postpaid account are still restricted to services provided through the mobile operator eg for value added services. Mobile carrier
billing has not yet started for ecommerce transactions though this is expected soon 
Reward Points – Some other more indirect ways of online payments are rewards points. On certain things that are purchased by a
person, a number of rewards points will be awarded which will get added to the buyers account. In the next transaction, the buyer can
choose to pay for their next purchase using the accumulated rewards points, which will replace what they would otherwise be paying
as money. 
Prepaid Cards – this is a relatively new and fast growing payment method. Typically a consumer may buy or be gifted a prepaid card
that can be used online. Usually this would be for a particular brand or for a retailer. Some online retailers have their own gift cards
which are sold to their customers, who in turn may use it for themselves or as give them as gifts. Gift cards have their own
authentication system and this may vary from issuer to issuer. Summary If you are a new online retail store or a brand planning to set
up an online store, you should contact a reliable payment gateway partner to assist with getting your online store to accept various
forms of payment as above. For Cash on Delivery and Bank Cheques, you would need to have a separate process and this would have
to be reflected in your webstore software as an option for consumers to choose. Select a good Payment Gateway provider who gives
you the maximum options and is also constantly adding new options based on the evolving marketplace and methods of payment. In
case companies like Net Distribution (www.ndslindia.com) are operating your online store, they will take care of selecting a good

payment gateway that accepts all forms of payments that may be applicable in the ecommerce industry in India .
Different modes of payment in commerce in
India
 Characteristics of mode pf payment in commerce

• Acceptability-
• Timeliness
Not all payments are time-critical, but users of the system should at least have options available that provide timely payment.
Timeliness has at least two elements. In some cases, such as emergency government payments, the timing of the availability of funds
to the recipient is critical. In other cases, such as point-of-sale or online retail transactions, it is important that the merchant has
immediate confirmation that the payment is on its way so that the transaction can be completed, even if the funds will not be available
until some time later.
It is desirable that everyone who needs to make and receive payments should have ready access to the payments system. Once again
this may have different elements. One is the ability to access the payments system when and where required. Cash, and more recently
credit and debit cards, have provided ready access for face-to-face transactions, but ‘remote’ transactions have historically been more
difficult, typically requiring the use of cheques or a visit to a bank branch. Innovations over recent years have of course dramatically
improved access, with first telephone, then internet banking, and more recently mobile banking and payments.
• Ease of use
It goes without saying that systems that are easier to use are preferable to
those that are more cumbersome. But this is not just an issue of
convenience. Systems that require manual entry of account and transaction
details are prone to errors that can be costly to correct and can discourage
use. That is one reason why payment cards are popular – because most of
the need for manual entry is removed. The need to know a recipient’s
account details is another challenge for many payment instruments.
• Ease of integration with other processes
Payments are rarely made in isolation. Typically they are made as part of a process that requires some form of information exchange
and reconciliation. Payment systems should be able to integrate efficiently with these processes. Key examples are the capacity of
payment systems to carry additional information relevant to the payment and the ability of payment messages to be easily integrated
with accounting and other business systems.
•

• Safety and reliability

• Low and transparent prices
If two systems perform exactly the same function, users can be expected to prefer the cheaper one. However, each system typically
has different attributes, and end-users make choices by weighing up those attributes and relative pricing. This means that both prices
and the systems’ attributes need to be transparent, so that those choices can be well informed. Given the two-sided nature of payment
systems, this does not of itself guarantee economic efficiency because prices are often skewed in favour of the party with the greatest
decision-making power. Pricing is most likely to be efficient where there is a reasonable alignment between the relative prices faced

by those with decision-making power and the relative resource costs of different payment instruments .
 Scope of payments in e-commerce

E- Commerce  is more than just buying and selling products online. It also includes the entire online process of developing,
marketing, selling, delivering, servicing and paying for products and services. India has shown tremendous growth in the E-commerce
segment. With an internet user base of over 300 million, India has third largest internet population after US & China .

India has witnessed a major breakthrough E-commerce success stories particularly in e-retail in Consumer Electronics & Fashion
Apparel & Home Furnishing segments. E-commerce creates new opportunities for entrepreneurial start-ups. Ease of Internet access,
Safe and secure payment modes coupled with aggressive marketing by E-Commerce Giants has revolutionized this segment. Rapid
development in mobile technology has given way to Mobile Commerce with many E-Commerce companies shifting to App only
model.
digital payments has really improved. At present, around 70%
of business organizations in India are managing their financial
transactions through digital payments. The most attractive
thing about the digital transaction is, it is very easy and simple
to manage the transactions without any hassle. You don’t need
to stand in long queues in order to make the payments to your
clients.
• With digital payments, you can simply pay or receive an
amount over the internet connection. In order to enhance the
comfort of users, the digital payment services are now
maintained through mobile devices. Yes, now you can easily
pay, receive, deposit or check the balance on your mobile
device. In this digital era, everything is now available on the
Smartphones. Thus the digital payments are also introduced
wisely.
• The small business organizations now don’t have to waste
their valuable time on the premises of financial institutes.
They can simply manage their necessary financial transaction
through their Smartphone. ftcash is one of the reputed
financial service providers in India. Since 2015, it has been
offering digital payment and loan facilities to the users. It has
designed a unique mobile application, through which it is very
easy to manage the payments.
• The mobile application is maintained with a user-friendly
interface with all necessary features. The customers can use
different payment options like credit card, debit card, net
banking, PayPal, UPI, mobile wallets and other in order to
manage the payments. You can simply search the name and
number of the merchant, through the search functionality and
can proceed the transaction.
• Again, you can also share the payment links through SMS,
email, Facebook, and WhatsApp in order to receive the
payments. Because of this unique mobile application, it is now
convenient for the SMEs and Micro-business organizations to
manage the payment in an effective way. There are no monthly
rentals or upfront fees associated with the mobile application.
Just by paying a nominal amount of Rs 300, you can easily,
manage the setup.
mobile application seems to be very handy as well as
flexible to handle the hectic financial transactions. In case,
you want some more information about the digital
payments; then you can log-in to the official website.
 Importance of commerce payments

• Variety of Choice
Electronic payment systems allow financial institutions, businesses and the
government to offer a variety of payment options to their customers. These
systems include automated teller machines, debit cards, credit cards, mobile
banking and payment of bills through the phone. Traditional business
payments systems depends mainly on a limited number of the business
outlets situated in different locations. This limits the client coverage, however
– through Internet services – systems that rely on e-payment are available to
a large number of clients
• Reduced Costs
E-payments systems result in reduced costs for both businesses and
individuals. Businesses save on operational and processing expenses mainly
due to reduction in technological costs – for example, the use of the Internet
and the acquisition of computers and other machines. Expenditures in paper
and postage is cut down along with time spent in executing personal
transactions. These reduced costs are often passed down to customers who
in turn pay less fees associated with transferring money or making payments.
Customers also save on time spent in dealing with personal transactions as
in traditional payment systems.
• Reliability
The use of e-payments cancels out the use of drafting
checks, transmitting cash and invoices for both businesses
and customers. This allows for faster execution of
transactions – for example, you do not have to wait for the
30 days required in invoicing transactions. Credit cards also
allow for customers to partake in transactions without
immediate cash.
• Security
The traditional payment systems mainly involved clients
sending their confidential information via post or physically
visiting the transaction site. This presented a number of
security risks – for example, your mail may get lost or fall
into the wrong hands. Additionally, places where financial
transactions take place are targets for criminal attacks. E-
payment systems offer encrypted services which protects
the clients’ private information during transmission and you
 Factors enhancing ecommerce
payments in India
• Efficiency
Cashless payment systems are offering unmatched efficiency to the buyers
and even more to the merchants. Using payment gateways, merchants are
able to address cash flow issues, receive payments for their sales made
directly into their online merchant banking accounts easily.
It allows for payments made through debit or credit cards, digital wallets,
online banking services and mobile banking, which facilitates the merchant to
process payment easily and without hassle.
• Reduced time and cost efforts
Worrying about preparing payments and managing payment issues can be
immoderate and tedious. An online payment framework is equipped for taking
care of payment procedures continuously.
•

• Unlimited features
•
Online payment services offer a lot of features for
that makes
payments through the merchant’s digital
payment system a cake walk. Like multi-
currency payments for popular international
currencies, such as USD, GBP, INR, AUD, etc.,
to accept payments from consumers all over
the world. Integrated SM and email marketing
are other amazing additions that make
business owner’s life easier
• Faster transactions
 Limitations of e-
•
commerce payments
•

• Password Threats
In case of e-banking or online financial transactions, you need to be a
registered user with the respective website. Though most transactions
involve the use of one-time passwords thus ensuring safety to a
considerable extent, some parts of a transaction, or your personal
details and bank account information is accessible through your
credentials for the online portal. This gives rise to the need of password
protection when handling financial accounts online. Also, if you are
transacting with multiple financial institutions or have accounts with
multiple banks, the risk of privacy breach is multiplied. For some,
maintaining multiple accounts online feels tedious.
• Limitations on Amount and Time
For withdrawal or fund transfer, certain banks may impose limits on the
amount or the number of daily transactions, whereby an amount
exceeding a certain figure cannot be withdrawn at once, or only a certain
number of transactions are allowed per day. While this is taken as a safety
measure, some may find it inconvenient. The access to money may be
delayed in case of electronic modes as against having physical access to
money. In case of taking electronic payments, the payment terms may
need to be longer. When different electronic payment services do not
cooperate with one another, e-currency exchange services may need to
be opted for.
• Risk of Being Hacked
When transacting online, your personal or account information and credit
card number is exposed over the Internet. This leads to the risk of your
account being hacked. Hackers may use your identity for fraudulent
activities or make huge fund transfers from your account, which could
mean financial losses for you.
• False Identity
There are no means to verify if the person entering information online is
the same person he claims to be. This is because unlike physical
transactions, the individual is not present in person, and one's identity is
not verified using a photograph or a physical signature. Mostly, electronic
cash transactions are based on cryptographic systems. Information being
transferred is encoded by means of numeric keys when the transaction
details travel across the web. Though electronic payments carry less risk
of forgery, the keys are vulnerable to attack.
• Additional Cost and Effort
Some electronic transaction services may require you to pay processing
fees and the like, thus leading to increased costs. Some systems require
setup fees, while some others enforce a certain number of transactions
every month. Electronic payment systems need Internet access, which
may invite additional costs. Setting up the account, accessing the Internet,
familiarizing oneself with the interface and operating it efficiently, involves
additional effort, and may be cumbersome for some.
•

• Anonymity and Privacy Concerns

All the transaction and user details are recorded by the payment systems
you are using, and stored in their database. This leads to lack of
anonymity. Cases of identity theft have raised privacy concerns in
electronic payments. If credit card details are not sent over a secure
server, if online transactions are not carried out over a secure Internet
connection, if virus protection software or firewalls are not in place, or if
data encryption techniques are not used, there is a serious risk of privacy
breach. In the absence of proper security measures, sensitive information
may be exposed to hackers, leading to illegitimate use of your identity or
money.
• Loss of Smart Cards
Electronic payments involve the use of smart cards (credit and debit
cards, ATM cards, identity cards, etc.) And this involves the risk of their
theft or loss. In case a lost smart card falls in the wrong hands or if it is
stolen, your identity is at the risk of theft and the money in the account that
the card is linked to, may be spent by fraudulent users. There are
measures to inform the bank about the loss of your card and get it
blocked. But the time between losing the card and blocking it, is critical.
Unauthorized users may carry out transactions in your name during that
 How to overcome
obstacles in e-payment
•Cultural inertia
system
Many businesses continue to use traditional
banking services to get things done. And many
don’t have a problem with this, as it’s the way it’s
always been done. New employees are shown the
well-tested processes, without questioning them,
while incremental improvements are made only
once there is broad agreement across the
organisation.But by taking this approach,
businesses are missing out on the efficiency and
flexibility that e-payments bring. They are paying
additional costs to make financial transactions,
• Compliance and security concerns
As with any new technology that involves financial
transactions, some of the caution from businesses
around e-payments is due to concerns around security
and compliance.
But most providers of these services are members of a
range of regulatory organisations or subscribe to the
rules and regulations these put in place. If
organisations perform their due diligence, it will
become clear which ones can be trusted to be secure
and reliable. ePayments, for example, holds a PCI DSS
Level One certificate, ensuring that the card details of
clients are handled according to the highest security
standards. The company is also licensed by the UK
Financial Conduct Authority to issue e-money for its
clients and their customers and is a principal member
• Legacy technology
Financial transactions for businesses are tied to
numerous other systems and applications within an
organisation. Changing the way in which financial
transactions are carried out will therefore have
implications beyond which bank is being used.
Many companies are still overly reliant on manual
payments. According to WEX, IT issues remain a top
factor stopping businesses from adopting e-payments
– in particular, interoperability concerns between e-
payments systems and legacy ERP platforms. As e-
payments are internet-based, switching to cloud-
based business applications can improve
interoperability, as well as the security of transactions.
With most legacy systems likely to move to the cloud