UNIVERSITY OF MUMBAI

A PROJECT ON
ROLE OF TECHNOLOGY IN DIGITAL PAYMENTS PROVIDED BY BANKS
University of Mumbai for partial completion of the degree of
Bachelor’s of commerce in Banking and Insurance
TYBBI SEM -6

For the academic year-2021-22

Submitted by
Preeti Nandkumar Magdum

Under the guidance of

Prof. Kishor Chauhan sir
MCT

MANJARA CHARITABLE TRUST

Smt. Sushiladevi deshmukh college of Arts science and commerce

Sector 4 Airoli Navi Mumbai 400 708
 ACKNOWLEDGEMENT
I , Preeti magdum would take this opportunity to thank the University
for providing me an opportunity to study Internet Banking. This has
been a huge learning experience for me.

With great pleasure I take this opportunity to acknowledge people who

have made this project work possible.

First of all I would sincerely like to thank Prof. KISHOR CHAVHAN for
helping me to gather information and guiding me for doing this project.

I would also like to thank the teaching staff of my college, my

colleagues, librarians and other people for providing their help as and
when required to complete this project.

PREETI MAGDUM
 INDEX
SR NO. CONTENT PAGE NO.
1. SUMMARY
HISTORY OF DIGITAL PAYMENTS

EXEXCUTIVE SUMMARY
The term Digital Payment means making payment to other person with the help of internet or
through electronic mode instead of paper money. In digital payment, banking sector plays a
major role by providing digital instruments like debit cards,mobile banking, etc
 In India major obstacle for the adoption of this digital payment system is slow internet
connectivity and the charges over the digital transactions. This study makes an attempt to
provide insights of the digital technology and innovative waysadopted by banks in their
operations and also to understand the perception of customers toward Digital Payment
System.

Keywords: Consumer perception, digital payments.

India is going to became cashless. Indian government launched digital India Campaign to
reduce dependency of Indian economy on cash and prevent from money laundering. To
making cashless India and increasing trends in using digital payment system various
Payment methods are emerging and developing. India is developing country and maximum
area is rural and shocking is computer literacy is only 6.5% then question arises that
implementation of digital payment system.

The research paper is making focus on the problems of digital payment system in India and
effects of the system in people and economic system of India. The research is paper also
trying to explain the future scope of payment system.

Digital technology is helps to make paperless transaction. For the development paperless
banking system there should be strong network of banking and India a hug banking network
is available and it is rapidly increasing also.

HISTORY OF DIGITAL PAYMENTS:

The digital payment start in world in 1979 Michael Aldrich introduced a technology which
allowed consumers to make direct purchases over the phone and electronic medium. His
innovation paved and introduced a new way for many businesses and customers to transfer
their money electronically. This process was 100% secure and purchases used to happen
instantly.

The origin of digital payment started after internet spread all over the world; mostly the first
half of the 90s. In Stanford, Federal Credit Union (1994) was established – the first financial
institution which offered online internet banking services to all of its members. The initial
online payment systems were not user-friendly at all and required particular information of
encryption or data transfer protocol.

The online and offline transactions are interpenetrating and the distinction between these
two becomes more and more blurred each year. It is related mainly to the vibrant expansion
of technologically superior mobile devices with the internet connection, and retailers who
allow you to pay in their brick-and-mortar stores with your Smartphone are nothing
exceptional nowadays. The digital payment is a way of payment which is made through
digital mode.

In digital payments, customer and trader both use digital modes to send and receive money.
It is also called as electronic payment. No hard cash is involved in digital payments. All the
transactions in digital payments are done online. It is an immediate and suitable way to make
financial transactions.

The arrival of digital within the payment industry occurred way later with the emergence of
modern technologies. First, the credit card was introduced in the late 1960s by Barclays. This
innovative mode of payment was gradually adopted by other financial institutions and
gradually improved until 2002, date at which the chip and pin technologies surfaced. Passed
the millenium,

What Is digital payments ?

A digital payment is the transfer of money or digital currency from one account to another
using digital payment technologies, such as mobile wallets or mobile payment apps. Digital
payments can also be referred to as electronic payments. 

Digital payment is 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.No hard cash (currency notes) is involved in the digital payments.
All the transactions in digital payments are completed online.

These transfers could be done through means of cards (debit/credit), mobile wallets, mobile
apps, net banking, Electronic Clearing Service (ECS), National Electronic Fund Transfer
(NEFT), Immediate Payment Service (IMPS), pre-paid instruments or other similar means.

Digital payments include any transaction where value (e.g., money) transfers from one
account to another electronically. Unlike traditional payments made with cash, digital
transfers are intangible. 

Here are a few digital payment examples to consider: Send someone a payment through your
phone? Digital payment. Pay a bill online? Digital payment. Use a mobile wallet to pay for
your groceries?. 

Through digital payment systems, there’s no need for cash, credit and debit cards, or checks.
When you use digital payment apps, everything goes through a processing system on devices
like mobile phones and computers. 

MEANING :
In today’s world, the world has become increasingly connected through various digital
platforms. It is due to the rise of technology and the internet. Moreover, there have been
various developments to make payments via the internet as well. These are highly secured
services offered by world-class finance technology or fintech companies. India has several
such online payment startups, and most of them support all the diverse methods available to
make such digital payments.

A digital payment, sometimes called an electronic payment, is the transfer of value from one
payment account to another using a digital device such as a mobile phone, POS (Point of
Sales) or computer, a digital channel communications such as mobile wireless data or
SWIFT (Society for the Worldwide Interbank Financial Telecommunication). This definition
includes payments made with bank transfers, mobile money, and payment cards including
credit, debit and prepaid cards.

DEFINE DIGITAL PAYMENT :

Digital payments are transactions that take place via digital or online modes, with no
physical exchange of money involved. This means that both parties, the payer and the payee,
use electronic mediums to exchange money. 

The Government of India has been undertaking several measures to promote and encourage
digital payments in the country. As part of the ‘Digital India’ campaign, the government has
an aim to create a ‘digitally empowered’ economy that is ‘Faceless, Paperless, Cashless’.
There are various types and methods of digital payments.

Please note that digital payments can take place on the internet as well as on physical
premises. For example, if you buy something from Amazon and pay for it via UPI, it
qualifies as a digital payment. Similarly, if you purchase something from your local Kirana
store and choose to pay via UPI instead of handing over cash, that also is a digital payment.
cheque and waiting for clearing. Because Digital Payment system take less time than
traditional payment system. A digital wallet, also known as e-wallet, is an electronic device,
online service, or software program that allows one party to make electronic transactions
with another party bartering digital currency units for goods and services.
ADVANTAGE OF DIGITAL PAYMENT SYSTEAM:
 1. Time Saver
2. Availabilities
3. Easy Purchasing
4. Use of wallet
5. Written Records
6. Less Risk

1.Time Sever: using digital payment system customer can pay to merchant transfer money
quickly and no need to make paymby cheque and waiting for clearing. Because Digital
Payment system take less time than traditional payment system.

2. Availabilities: Digital payment system can use by customer from anywhere and anytime
there is no need to go banks for every transaction.

3. Easy Purchasing: The Digital payment system provides facility to user for purchasing by
using ATM card Credit card and POS therefore it is easy for making transaction and no hard
cash required to travel with us.

4. Use of Wallet: The Digital Payment system includes digital wallets which make payment
easy and with that wallet customer can get discount as well as cash back.

5. Written record: You often forget to note down your cash spending. Or even if you note,
it takes a lot of time. But you do not need to note your spending every time with digital
payments. These are automatically recorded in your passbook or inside your E-Wallet app.
This helps to maintain your record, track your spending and budget planning.

6. Less Risk: In digital Payment system it provides us securities for every transaction it
require MPIN or OTP which can be avoid frauds in the system.

DISADVANTAGES OF DIGITAL PAYMENTS :

1.While digital payment does make transactions easier, the apps that help you pay will
certainly charge some costs. You will have to pay third-party payment service charges
.
2. Not all shops are equipped with the facility of online payment. So, it is not possible to
perform digital payment in such cases.

3. It might create privacy issues as you will have to share all of your transactions and account
details with third-party services.

4. There might sometimes be a case of your account being hacked and your money being
misused

INTRODUCTION OF DIGITAL PAYMENTS :

The growth and development the civilization depends on transaction, adoption and payment
system. The mode of doing transaction has been changed substantially over time, i.e., from
the stone aged Barter system, to coins and hard cash transaction, then to plastic money
payment mode and gradually to virtual payments.

Digital payments refer to the electronic mode of transactions done by the consumers which
includes payments for services and goods that are made via internet, mobile payments at the
point-of-sale (PoS) and account to account transfers among the private users. The digital
payment system can be renamed as digital transaction/ digitization/ cashless exchange. This
term, cashless exchange has been basically introduced by the esteemed Prime Minister of the
country, as a major revival in the government policy after demonetization of high
denomination money i.e., Rs. 500 and Rs. 1000 leading towards the growth of virtual money
for transaction and computerized installation.

By the end of February 2018, advanced wallet organizations had demonstrated a

development of 271 % for an absolute estimation of US$2.8 billion (Rs. 191 crores), for the
Indian government and private segment organizations. For example mSwipe, Freecharge,
Phonpe and paytm has been forcefully implicating a few advanced installment applications,
including the Aadhaar Payment application, the UPI application, and the National Payments
Corporation of India (NPCI) built up the Bharat Interface Evaluate for Money (BHIM)
application.

Computerized mode of utilizing the applications for digital transaction Money (BHIM)
application. This paper is about the attitude of people towards adoption of Digital Payments
methods in order to have transparency in their operations. Digital Payments were encouraged
by Government of India after the announcement of demonetization on 8th November 2016.
The basic objective behind the initiative of Digital Payments was to achieve cashless
economy in the long run.

Due to the increasing corruption and black money in India, it was becoming difficult to avail
the statement of transactions and transfers made by people to other parties. Digital India was
a campaign launched by Government to increase transparency in operations and attain
governance.

India is predominantly a cash-based economy where apprehensions of going digital,

perennially persist. According to a report by Credit Suisse Group AG, 72% of India's
consumer transactions take place in cash, double the rate as in China. Nevertheless, a
paradigm shift was observed when India announced demonetization on 8th November 2016,
announcing all five hundred and one thousand rupees banknotes as redundant, effective
midnight.

An unsolicited push gave birth to the new economy that strives for digital inclusion and sees
rapid expansion year on year. As of November 2019, India had over 115.5 crore wireless
telephone subscribers resulting in a tele density of 88.90%. (Reserve Bank of India, 2020).
This increase in smartphone devices has supported this growth and adoption of various
digital means of payment.
Digital payments will increase employment, reduce risks related to cash like corruption,
robbery, and carrying large amounts of cash, helping people to transfer the money with
security and safety at highspeed. (Pandey, A., & Rathore, A. S., 2018). Cash is King, but
Digital is Divine. An inevitable movement towards digitalization makes understanding
digital payments not only extremely interesting but a dynamic study.

The pandemic has unlocked the need of adopting digital modes more than ever with social
distancing gaining prime importance and the uncertainty of its end driving this need
furthermore. The motivation behind this study stems from this ever-evolving subject going
through another big change since 2016, with a desire to explore the perspective of the masses
towards the new normal and their expectations regarding digital payments in the same.

A digital payment is the way of payments through the digital modes. The digital payment
was introduced in the year of 90‟s. It is the convenient and instant payments through the
Internet. There is no hard cash involved in the digital payments. Every customer has the
dilemma of choosing safe, secure, convenient & cashless payments. Even though the private
and public sector banks are providing various modes to use the digital payments but the
customer awareness acceptance and usage of those bank sector is always have the difference
between them.

The fast advancing global information infrastructure including information technology and
computer networks such as the Internet and telecommunications systems enable the
development of electronic commerce at a global level.

The nearly universal connectivity.Cashless society describes an economic state where

financial transactions are not conducted with money in the form of physical bank notes or
coins, but rather than digital currency, crypto currency is used.

The Digital payment system is now became the essential part of banking transaction. The
Digitalization is need of country because it is important to develop the financial sector as per
the modern age requirement and to face the competitions with developing countries.

The PM Narendra Modi started a mission Digital India in 2017 for removing hidden money
and black money from the country. The digital payment system is a part of the mission from
this cashless transaction will made all over the India and the progress black money or money
laundering can be reduce. It is also important that development of techniques influences the
traditional system and there also have to face some problems while newly adaption.

In India ICICI bank stated the online banking services and Digital bank is also ahead in
digitalization of transaction digital services provides to customer. SBI is a public sector bank
which is enriched of digitalization. In 2011 SBI launched green Channel to promote digital
system and save environment. The traditional system is replacing by the digital system. The
traditional payment systems are Cheques , withdrawals, drafts, money orders, letters of
credits, travel cheques etc.
Why Payment systems also turning into electronic payment system using computer and
internet there are several reasons of adaption . The most common reason is that the
traditional system has some leakages and inefficiency and that’s overcome by the digital
payment system. But in India digital system is in emerging trend and not so popular and
generalized Today India is using most common electronic payment systems include Debit
Cards, Credit Cards, but the use of Electronic Fund Transfer, Internet Banking, Unified
Payment System (UPI), e-commerce payment system, internet banking, and *99# USSD
based payment system etc are not in popular use. Therefore it is important to know the
problems of digital payment system and its progress in India.

India’s digital payments system has evolved rapidly over the last few years. This has been
encouraged by various developments in information and communication technology and by
forward looking Regulatory and Government policies.

The trinity of near universal account penetration, increasing smartphones penetration and low
cost payments rails has led to a never-before boom digital transactions. For instance, since
April 2016, UPI has become synonymous to a rapid digital payment which has seen an
exponential growth trajectory to cross over 200cr transactions a month. This is further
expected to grow 10x over the next 3 years.

Digital payment, also known as electronic payment, is a global phenomenon. Across the
world, digital payments are the most popular way of payments in developed nations and
rapidly growing in the developing nations as well. In the last few years, a large number of
people are resorting to digital payments in India. This phenomenon is observed among
people across classes of society. India has witnessed a major transformation in the post
demonetization era. We are gradually shifting from Cash Transactions to Cashless
transactions. Digital Payments have emerged as one of most effective tools of payments.

Government policies and initiatives such as Pradhan Mantri Jan Dhan Yojana,
Demonetization, Technological advancements in the area of IT and Telecom, particularly
related to Internet and Mobile Telephones, changing banking systems, technology savvy
young generation, ease of use, and many other factors have significantly contributed to
development of digital payments ecosystem in India.

Digital Payments are changing the buying habits of Indian consumers. There is an increasing
use of various types of digital payment options for purchase from Online store or Traditional
brick and mortar stores. There are important economic and social implications of shift
towards digital payments. At one end it is contributing to economic growth of the nation,
whereas, on the other hand it is contributing to the quality of life of citizens. Growing usage
of digital payments are also resulting in increased sale for online and offline retailers.

The role of money in transactions is well established in economics. Since centuries, cash has
been used as the primary mode of transaction. Development of electronic payment systems
has created a large number of other options for transactions for both buyer as well as seller.
Changing technology, particularly internet and mobile phones, along with banking and retail
revolution are changing buying behaviour of both urban as well as rural buyer. The growing
use of digital payments is reshaping buying pattern of consumers. Their awareness,
perceptions, attitudes, decisions towards use of different digital payment options are
undergoing major changes and also influencing their purchase behaviour.

The Committee on Digital Payments (2016), Ministry of Finance explains that there are four
valid reasons for enabling the digital payments revolution - First, cash is expensive. Second,
advancements in technology are creating robust, secure and convenient payments solutions.
Third, digital payment is characterized by lower costs, greater scalability and ease of access
which contributes to economic growth and financial inclusion. Fourthly, the recent
Government initiatives have enabled the ecosystem for digital payments. Considering the
digital revolution and its importance from economic, social, and consumer perspective, the
present study is aimed at understanding the digital payment system and its influence on
consumer buying behaviour.
Impact of COVID 19 on digital payments:

The COVID-19 pandemic has led to a shrinking in digital transactions in India. In

corroboration, the growth of currency with the public in India accelerated from 11.2 per cent
on February 28 to 14.5 per cent as on March 31, to 21.3 per cent as on June 19, 2020 (12.8
per cent a year ago). At the same time, the cumulative value of digital transactions during
January-May 2020 declined by 25.5 per cent (y-o-y) as compared with a strong growth of
20.6 per cent a year ago.

Digital retail transaction value growth contracted by 10.6 per cent as compared with an
increase of 31.3 percent last year. However, both these indicators recovered in the month of
May 2020. In digital payments, the retail RTGS volume, which had registered healthy
growth since July 2019 due to waiving of RTGS charges by the Reserve Bank, declined in
March (-12.3 percent), April (-52.5 per cent) and May (-27.5 per cent). While they regained
traction in May, transactions through Immediate Payment Service (IMPS) had started
declining in February 2020 and the drop became sharper in April 2020.

Unified Payments Interface (UPI) transaction volume declined by 5.9 per cent in March 2020
and further by 19.8 per cent in April 2020 to slightly less than one billion transactions.
However, it recovered as the lockdown was gradually lifted and logged a record 1.34 billion
transactions in June 2020.

The ratio of RuPay card transactions at e-commerce portals to point-of-sale (PoS) jumped to
237 per cent in April 2020 from 76.8 per cent in February 2020, reflecting the effect of social
distancing. Apart from low demand during the lockdown, the suspension of operations by
leading users of digital payments such as e-commerce and BigTechs could have contributed
to a decline in small value digital payments.

The decline in digital transactions during the lockdown period is indicative of the integration
of the digital economy with the real economy. Digital transactions are expected to pick up
when economic activity gathers momentum, with enabling conditions for uninterrupted
growth of digital payments such as spread of seamless digital connectivity within consumer
local traders, distributors, producers and other stakeholders.

Among rising fears of Covid-19 spread, when the physical transactions have almost crashed,
the digital payments in India have witnessed an exponential spike in the last 21-day
lockdownperiod.In the past three weeks over 42% Indians have used digital payment mode
multiple times as compared to the pre lockdown period.

Digital payment platforms have also not just seen a surge in the number of transactions but
the number of downloads of digital payment platforms have also almost doubled Many e-
retailers are also requesting payments via digital mechanisms, which is also contactless and
reduces risk of spreading coronavirus. Besides the National Payments Corporation of India
(NPCI) has also urged people to use digital payment methods, so that people do not step out
even to go to the ATM, reduce social contact and curb the spread of Covid-19.
As per the report about 54% of respondents have used their Visa card, while 30% have made
online payments via Mastercard. About 12% respondents have used Rupay card for making
online payments, the report added According to a report by PWC India on “Impact of the
Covid-19 Outbreak on Digital Payments” released in May, 2020 following points were
mentioned.

 Cards will be used more as there is a concern over transmission of the virus through the
exchange of physical currency will boost online card transactions.

 Fund transfers to/from bank accounts will likely see an uptick as people substitute cash
with digital transfers.

 Transactions at ATMs will decrease as a result of the lockdown being enforced. Not much
cash will be required compared to earlier.

 With no physical avenues to pay bills, people are adopting BBPS, leading to a relatively
higher number of transactions.

 The IMPS facility will see relatively increased activity as fund transfers shift to digital
means.

 Online, paperless processes to issue products like unsecured loans and credit cards without
any in-person contact.

 Shift in consumer behaviour – greater adoption of digital payments.

.

DRAWBACKS:
Internet Connectivity:
The digital payment system work on internet only & in India internet speed is very low as
compare to other countries.

Service fees:
The payment gateways & third-party payment transactions charge service fees.

Technology Savvy:
Another drawback of digital payment system is people who aware how to use technology
they are only use this method. The people those are not aware about this technology are not
used this method.

MAJOR CHALLENGES/ PROBLEMS OF DIGITAL PAYMENTS:

1. Lack of trust among people in digital payments.

2. Lack of knowledge and awareness among uneducated or less advanced people.

3. Less reliability due to scams and hacking cases cases.

4. Loss of internet connection sometimes.

5. Delay in cashback processing by E-commerce Companies and e- wallet Companies.

6. Sometimes the payments get blocked and no confirmation is sent to customer regarding
status of payment.

Various methods of Digital Payments available in India are as follows:

1- 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.

 2- 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, OxigenJioMoney,
Paypal, Buddy, Pockets etc.

3- 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.

4- 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.

5- 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.

6- 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 ways The study is conducted to obtain data on adoption of digital payment system
in India. The study is conducted in Hyderabad region. A sample size of 200 was selected
using the convenience sampling. out of which 183 were responded. This represents a
response rate of 92%. Structured questionnaires are used for collecting data.

Why would you use Digital payment methods?

Digital payment techniques are more advantageous and is more made sure about contrasted
with making exchanges including money withdrawal. This technique for payment advances
straightforwardness and responsibility, lessen exchange expenses, and reduction the size of
the dark or casual economy. No extra expense of printing money on the grounds that during
the demonetization stage RBI needed to burn through 7935 crores to print the recently
planned money. Sets aside cash and time-Whereas actual money prompts weaknesses of duty
evasion,black cash and phony cash, digital cash is in danger from information holes and data
fraud on the web. A month ago, for example, India saw its greatest such information break
that put in danger 3.2 million charge cards. For India, the expenses related with information
breaks are ascending also.

SCOPE OF STUDY :
Considering the literature reviewed and structure planned for this paper, undertaking similar
surveys in the future will help draw a comparative analysis, exploring factors that will shape
the expectations of people with time.
A .study can be done when a vaccine is introduced and mass distributed.

B. The next phase can be another survey, 5-10 years down the line, to obtain a fresh set of
values thathave the potential to observe a significant shift in consumer perception.

C.These will polish the objectives of this paper and add greater value to it, ultimately
ensuring that the effort put in this study ages well. Indian government implemented digital
India to make our economy as data based economy and cashless economy.

D. Digital payment is one of the important technologies introduced in the bank. This Study
covers the different digital and electronic modes used by the customer to make payments.
Past five year data has been taken to analyze the present status of digital payments in India. .
 
The payment system in India is evolving at a faster pace. The payment which was once done
in the form of barter system has now evolved into Digital payment. The Digital ways of
payment  provide convenience to the customers and people using it. With the Digital India
Movement initiated in 2014 by Prime Minister Narendra Modi, India is now going cashless
and making their payments online.

There are various payment applications used by the people. The payment transactions have
evolved from cash transactions to plastic money and now cashless transactions. A person can
purchase a product online with cash in hand, transfer money from one account to another in a
fraction of seconds. People do not have to go to the banks stand in a queue in order to
withdraw money to transfer money it can simply be done within seconds with the help of
mobile phones.

There are various payment applications providing services to the customers. These
applications  provide safety and security to both the payer and the payee. They also provide
cash backs and various rewards to the users which attracts them. Also there are various
advantages as well as disadvantages of digital payment.
DIGITAL PAYMENT IN INDIA :
CHALLENGES & OPPORTUNITIES
In recent years, digital payments have seen momentous growth in India. In terms of volume,
digital transactions grew from INR 220 Crore in 2013-14 to over INR 2,000 Crore in 2017-
18. This huge growth is largely credited to Unified Payment Interface (UPI) based mobile
transactions, which saw over 3 billion transactions last year with 620 million transactions
worth INR 1 Lakh Crore in December alone. 

Demonetization and the adoption of UPI platform by national and international players like
Google, WhatsApp, Paytm and PhonePe have played a significant role in enabling the rural
Indian economy to move towards digital payment in a big way. While digital transactions
continue to grow, cash still plays a massive role in the economy with currency to GDP ratio
pegged at 10.70per cent as of March 2019.
Even though the number of digital transactions is a positive sign for the economy, we are far
from creating a robust digital payment ecosystem. There are several structural challenges that
are hindering the growth of digital payments in the country.

While a growing number of e-commerce platforms are adopting digital payment methods,
consumers still prefer the option of paying by cash. This phenomenon is in part related to the
scare regarding cybersecurity in digital transactions. It is to be noted that during 2016-2018,
India was the second most cyberattacks affected country. Lack of technological awareness
and high risks associated with cybersecurity have kept consumers from adopting digital
payment methods wholeheartedly.

While there is no dearth of digital payment modes ranging from debit/credit cards to online
banking, there is a need to make transactions cheaper and enhance interoperability of the
payment systems to make them more flexible for the stakeholders. This is not only an
opportunity for non-banking companies to innovate but to also adopt the already available
technologies like Aadhaar Enabled Payment System (AEPS), which does not involve
transaction charges and is consumer-friendly.

Since the growth of digital payments largely depends on the rising rural population getting
connected to high-speed internet and smartphones, it is important for digital startups to focus
on secure consumer-friendly methods in order to build trust and drive adoption. 

REVIEW OF LITERATURE -
1. Ashban and Burney (2001) in their study revealed that customers increasingly extent their
use of electronic banking as their experience grows with the system. In general, Saudi
customer's income levels and education play a vital role in their adoption and usage of
electronic banking technology.

2. Filomina P.George (2009) Today banks have centralized operations and are increasingly
moving towards core banking solutions network-based computing, new delivery channels,
such as networked ATMs, internet banking, smartcards based products etc.

3. Gerrard and Cunningham (2003) security concerns and the negative issues associated with
new technologies in general seemed to be the main reasons for nontechnology customers
avoiding it. However, internet bank's positive performance in terms of accessibility,
convenience, time saving, and ease of use seemed to motivate time-poor, technology-
oriented customers to use it, in spite of security concerns and a certain degree of
depersonalisation.

4. For complex operations-such as mortgage loans customers preferred personal interaction

in the bank branch. From the customers' perspective, the great advantage of the Branch
Banking is the possibility of having person-to-person interaction, which is expected to bring
mutual knowledge, individualised attention, professional competence of employees, and
responsiveness in non-routine situations.

5. Ibrahim et.al. (2006) the key dimensions of electronic service quality identified by UK
banking customers include the convenience and accuracy of electronic banking operations;
the accessibility and reliability of service provision; good queue management; service
personalisation; the provision of friendly and responsive customer service; and the provision
of targeted customer service. The first two factors, the convenience/accuracy and
accessibility/reliability of service provision, have significantly greater edge in explaining the
e- service quality perceptions of the surveyed UK banking customers than the other
identified dimensions, including good queue management, service personalisation, and the
provision of friendly, responsive and targeted customer Service .

6. Jayawardhena and Foley (2000), on the other hand, listed the advantages for electronic
banks: cost savings, increased customer base, mass customization, marketing and
communication, innovation, and development of non-core business. It revealed that roughly
one-half of consumers would first enquire with their existing banker if they needed a new
financial product. In the case of e-banking, savings of time, money and convenience have
been cited as relative advantages.
7. Kumar S. and Sujit K.A. (2006) explain the importance, usage and implementation of e-
purse in different countries including India. The study highlights some issues related to e-
purse as well as its implementation in Indian context as compared to foreign countries. It
concludes that e-purse is still at a nascent stage in India as compared to other e-facilities like
credit/debit cards, ATMs etc. The study suggests making e-purse more user friendly like
credit cards, providing wider base in terms of issuer, location and service providers to
facilitate its usage at transportation services, educational institutions, shopping malls etc.

8. Leow and Bee, (1999) The terms „PC banking‟, „online Banking‟,telephone banking‟ or
„mobile banking‟ refer to a number of ways in which customers can access their banks
without having to be physically present at the bank branch. E-banking may be understood as
a term that covers all these ways of banking business electronically.

9. Lee and Lee (2000) did find that for direct bill payment, minorities were less likely to have
already adopted the technology. Increases in income and education tend to be positively
related to the adoption of an innovation. Prior research has empirically found positive
relationship between perceived ease of use and perceived usefulness as critical factors on the
use of e-banking (Agarwal et.al. (2000), Johnson and Marakas (2000)).

10. Lisa Wessels, Judy Drennan, (2010)164 aim to identify and test the key motivators and
inhibitors for consumer acceptance of mobile phone banking (Mbanking), particularly those
that affect the consumer's attitude towards, and intention to use, this self-service banking
technology Perceived usefulness, perceived risk, cost andcompatibility were found to affect
consumer acceptance of M-banking. The results also support a mediation model, whereby
attitude transfers the affects of the consumers' perceptions to their intention to use Mbanking.

11. Singhal Rashi (2021): quoted in her paper “Impact and Importance of Digital Payment in
India” that services offered by banks in digital form provides various opportunities to the
banks when it comes to the benefit of their customers. The shoppers have a great impression
along with a worthwhile effect upon the use of digital payments services. As one of the
largest providers of financial and monetary services in our smart cities and the bush of rural
areas, business banks provide inimitable services to their potential customers.

She has founded that RBI and Indian government has brought up some noticeable
acceptances with an entry of a mode such as non-financial system of deferred payments. The
regular improvement in transmission of media as well as innovation has provided stimulation
to voluntary framework of computerised instalments. Further she also mentioned about
various governmental activities such as demonetisation or GST which is contributing to the
economic expansion along with spreading of net for high expenses.

12.Vally Suma and Divya Hema (2018): mentioned in their study on “digital payments in
India with perspective of consumer adoption” that digital payments services got hike after
the happening of demonetization which gave rise to use of BHIM and UPI applications with
a presence of full transparency. The researches have conducted a primary survey for 183
people from Hyderabad region of India and analysed their data through application of a
technique that is Chi-square. They founded that technological deployment in case of digital
payments has raised banking performances that is competent to attain objective of cash less
economy. They further analysed that banks are required to bring some measures that are
effective in order to create awareness while using security or technology.

13.Jain, Sarupria and Kothari (2020): studied “the Impact of COVID-19 on E-wallet’s
payments in Indian economy” and analysed that happening of COVID-19 has brought a great
boost for the Indian economy especially for the sectors like food and beverages,
entertainment and others. The services of digital payments have seen huge growth that is
from 5 per cent to 30 per cent after the happening of demonetarisation also with continuous
efforts of government towards economy. There is a big contribution by entertainment and
hospitality industry which is approximately 40 per cent to the economy which is helping for
growth.

14.Balaji and Vijaykumar (2018): analysed the concept of “Diffusion of Digital payment
system in Rural India” and mentioned the significance of cashless country in context to
Southern Indian economy through application of a specific research tool that is Structural
Equation Modelling. The researchers have collected some data from people who belong to
rural areas of South India and founded that there are some people who are still unaware about
the economy which is moving towards cashless country and were very much reactive while
mentioning for their responses. On the other hand theyfounded that digitalization is now a
priority of survival, the economy of digitalisation has a significance impact on social lives of
people. The adoption of digital payment services by rural community will enhance south
India and contributes in installing computerised systems in areas.

What are the different methods of digital payments?

After the launch of Cashless India, we currently have ten methods of digital payment
available in India. Some methods have been in use for more than a decade, some have
become popular recently, and others are relatively new. 

1.Banking Cards

Indians widely use Banking cards, or debit/credit cards, or prepaid cards, as an alternative to
cash payments. Andhra Bank launched the first credit card in India in 1981.

Cards are preferred because of multiple reasons, including, but not limited to, convenience,
portability, safety, and security. This is the only mode of digital payment that is popular in
online transactions and physical transactions alike. Nowadays, many apps are being launched
with the sole purpose of managing card transactions like Cred, Square, etc.

2. Aadhaar Enabled Payment System (AEPS)

AEPS is a bank-led model for digital payments that was initiated to leverage the presence
and reach of Aadhar. Under this system, customers can use their Aadhaar-linked accounts to
transfer money between two Aadhaar linked Bank Accounts. As of February 2020, AEPS
had crossed more than 205 million as per NPCI data.AEPS doesn’t require any physical
activity like visiting a branch, using debit or credit cards or making a signature on a
document. This bank-led model allows digital payments at PoS (Point of Sale / Micro ATM)
via a Business Correspondent(also known as Bank Mitra) using Aadhaar authentication. The
AePS fees for Cash withdrawal at BC Points are around Rs.15.

3. Unified Payments Interface (UPI)

UPI is a payment system that culminates numerous bank accounts into a single application,
allowing the transfer of money easily between any two parties. As compared to NEFT,
RTGS, and IMPS,

UPI is far more well-defined and standardized across banks. You can use UPI to initiate a
bank transfer from anywhere in just a few clicks.

The benefit of using UPI is that it allows you to pay directly from your bank account, without
the need to type in the card or bank details. This method has become one of the most popular
digital payment modes in 2020, with October witnessing over 2 billion transactions. 

4. Mobile Wallets

Mobile Wallets, as the name suggests, are a type of wallet in which you can carry cash but in
a digital format. Often customers link their bank accounts or banking cards to the wallet to
facilitate secure digital transactions. Another way to use wallets is to add money to the
Mobile Wallet and use the said balance to transfer money.

Nowadays, many banks have launched their wallets. Additionally, notable private companies
have also established their presence in the Mobile Wallet space. Some popularly used ones
include Paytm, Freecharge, Mobikwik, mRupee, Vodafone M-Pesa, Airtel Money, Jio
Money, SBI Buddy, Vodafone M-Pesa, Axis Bank Lime, ICICI Pockets, etc.

5 .Bank’s Prepaid Card

Bank’s prepaid card is also known as Gift Card or Preloadable debit card for a single-use or
reloadable for multiple uses. Any KYC complied account holder can create Bank’s prepaid
card from the Bank’s NetBanking websites or purchase from Bank’s official websites. The
prepaid card can be Visa or RuPay powered depending upon the Bank. The prepaid cards
mainly used for Corporate Gift, Reward Card or any single-use card for gifting purposes. The
Prepaid card can be used to withdraw money at ATM or performing an online transaction at
any Payment Gateway up to a certain limit. Some popular Banks which offer prepaid card in
India are

 Axis Bank Prepaid Card

 HDFC Bank Prepaid card
 SBI Prepaid Card
 ICICI Bank Prepaid card
 Yes Bank Prepaid card
 Kotak Bank Prepaid card

6.PoS Machine

You might observe PoS Machine or Point sale Machine at various Shopping Malls, Petrol
Pumps, Movie Ticket Booking or many Kirana shops. You can pay shopping bills by
swiping your credit or debit card, only you need to put your Card PIN to authenticate the
transaction. All the Banks now starts providing contactless debit or credit card to its
customers. You can authenticate the transaction just by holding the Debit or Credit Card on
the Contactless reader of PoS Machine. You don’t need to provide the Card PIN up to
Rs.2000.00, it will auto-authenticate. The contactless payment works using the NFC payment
technology (Near Field Communication Technology).

There are two types of PoS Machines available in India, Wired (requires Telephone
connection) and wireless (requires SIM card or Wifi connection). Most of the acquiring
Banks now offer mPOS type of PoS Machine. SBI is now the largest acquiring Bank (Banks
which provides the PoS terminal to the merchant) in the country.

7.Internet Banking: Internet Banking, also known as e-banking or online banking, allows
the customers of a particular bank to make transactions and conduct other financial activities
via the banks website. E-banking requires a steady internet connection to make nor receive
payments and access a banks website, which Today, most Indian banks have launched their
internet banking services. It has become one of the most popular means of online
transactions. Every payment gateway in India has a virtual banking option available. NEFT,
RTGS, or IMPS are some of the top ways to make transactions via internet banking is called
Internet Banking.
Here’s the list of some Banks which has the best internet banking portal in India

 ICICI Bank
 State Bank of India
 HDFC Bank
 Kotak Mahindra Bank
 DBS Bank
 CITI Bank
 Axis Bank
 Yes Bank

8. Mobile Banking

Mobile banking refers to the act of conducting transactions and other banking activities via
mobile devices, typically through the bank’s mobile app. Today, most banks have their
mobile banking apps that can be used on handheld devices like mobile phones and tablets
and sometimes on computers.Mobile banking is known as the future of banking, thanks to its
ease, convenience, and speed. Digital payment methods, such as IMPS, NEFT, RTGS, IMPS,
investments, bank statements, bill payments, etc., are Available on a single platform in
mobile banking apps. Banks themselves encourage customers to go digital as it makes
processes easier for them too.

Benefits of Digital Payments:

 Faster, easier, more convenient: Perhaps, one of the biggest advantages of cashless
payments is that it speeds up the payment process and there is no need to fill in lengthy
information. There is no need to stand in a line to withdraw money from an ATM or
carry cards in the wallet. Also, with the move to digital, banking services will be
available to customers on a 24/7 basis and on all days of a year, including bank
holidays. Many services like digital wallets, UPI, etc, work on this basis.

Economical and less transaction fee: There are many payment apps and mobile
wallets that do not charge any kind of service fee or processing fee for the service
provided. The UPI interface is one such example, where services can be utilized by the
customer free of cost. Various digital payments systems are bringing down costs.

Waivers, discounts and cashbacks: There are many rewards and discounts offered to
customers using digital payment apps and mobile wallets. There are attractive cash
back offers given by many digital payment banks. This comes as boon to customers
and also acts a motivational factor to go cashless.

Digital record of transactions: One of the other benefits of going digital is that all
transaction records can be maintained. Customers can track each and every transaction
that is made, no matter how small the transaction amount this.

One stop solution for paying bills: Many digital wallets and payment apps have
become a convenient platform for paying utility bills. Be it mobile phone bills, internet
or electricity bills, all such utility bills can be paid through a single app without any
hassle.

Helps keep black money under control: Digital transactions will help the
government keep a track of things and it will help eliminate the circulation of black
money and counterfeit notes in the long run. Apart from this, this may also give a
boost to the economy as the cost of minting currency also goes down.

Digital payments are slowly gaining popularity in India and there are many apps that
are being launched in this sector. It has become a hassle-free and secure way to make
payment.

Evolution of Digital Payment in India:

India’s payments framework – especially, the digital payments system – has been advancing
heartily over the past numerous years, prodded by advancement in data and communication
technology, and fostered and in consonance with the way imagined by RBI.

The advent of online banking began in the 1990s with the availability of internet. Online
banking changed the entire scenario of financial services.

The evolution of digital payments in India is piloted by the Reserve Bank of India (RBI) and
captured in the Payment Systems in India, published in 1998.

The Payment and Settlement Act, 2007 has defined Digital Payments as any “electronic
funds transfer”, i.e. any exchange of funds which is initiated by an individual by way of
instruction, authorization or request to a bank to debit or credit an amount from an account
maintained with that bank electronically and incorporates point of sale transfers; ATM
transactions, direct deposits or withdrawal of funds, transfers initiated by
phones or internet and card payment.

Critical achievements accomplished in this overall process of development of the payments

framework incorporates the introduction of MICR (Magnetic ink character recognition
code) clearing in the early 1980s,Electronic Clearing Service and Electronic Funds
Transfer in the 1990s, issuance of credit and debit cards by the banks in the 1990s,
the National Financial Switch in 2003 that realized interconnectivity of ATMs the nation
over, the RTGS and NEFT in 2004, the Cheque Truncation System (CTS) in 2008, the
second factor authentication for the ‘card not present’ transaction in 2009 and the new
RTGS with upgraded features in 2013.

The National Payments Corporation of India (NPCI) was established in 2008. It has been

leading the development of the retail payments framework. Besides, non-bank entities have
been presented in the issuance of prepaid instruments (PPI), including mobile and digital
wallets. These measures have been complemented by noteworthy initiatives by the NPCI
including the launching of grid-wise operations of CTS, interoperability on NACH
(National Automated Clearing House), IMPS, NFS, RuPay, APBS and AEPS, National
Unified USSD Platform (NUUP), UPI and BHIM application.

These advancements catch the evolution of the Digital Payments framework in the nation.
This was trailed by a noteworthy initiative by Indian Government which set up the
Committee of Digital Payments in August 2016 under the Chairmanship of Ratan P. Watal,
Principal Adviser, NITI Aayog.

Post demonetisation in November 2016, the adoption of digital payment methods in India
received a major lift. Demonetisation pushed Indians towards switching to cashless methods
which come with aplenty of hidden costs, yet when the weight diminished, Indians were back
to utilizing cash.