Digital Payments

Ques 1

Introduction:

A digital depiction of worth that is only accessible in electronic form is called a virtual
money. Through certain computer, mobile, or software apps, it is stored and transacted.
Virtual currency exchanges take place through secure, specialised networks or the Internet.
The majority of the time, they are uncontrolled and granted by private individuals or groups
of developers. Digital currencies, such as cryptocurrencies and tokens produced by private
companies, are included in the category of "virtual currencies," which is a subset of all digital
currencies. The simplicity of use and shorter transaction times of virtual currency are
benefits. Virtual currencies have the drawbacks of being hackable and offering investors little
in the way of legal remedies due to their lack of regulation. Virtual money is a type of
uncontrolled digital currency. It is not issued nor managed by a central bank. Examples of
virtual currency include Bitcoin, Litecoin, and XRP. Digital currency is a form of money that
is stored in software, applications, and networks and used for transactions. Virtual currencies
are often produced by private issuers for usage by certain online communities. The security of
the networks and software that underpin virtual currency is a big problem. Traditional
controlled currencies have fiat money (sovereign debt) or physical assets like gold as their
backing. In contrast, virtual currencies are unbacked and have no fundamental value. The
value of a virtual currency is mostly affected by market sentiment. Because virtual currencies
are unregulated, their values can vary greatly. A sort of unregulated digital currency known as
"virtual currency" is not created or managed by a central bank. Examples include Litecoin,
XRP, and Bitcoin.
Centralized or decentralised virtual currencies are both possible. There is no centralised
administrator for a decentralised virtual money. Blockchain networks, which are based on
cryptography, are necessary for the decentralisation of virtual currency. Cryptocurrency is the
name for the digital money that uses cryptography.

Concept and application:

Cryptocurrency is a type of digital money that does not rely on banks to verify transactions.
Payments may be sent and received by anybody, anywhere thanks to peer-to-peer technology.
Payments made with cryptocurrencies only exist as digital entries to an online database that
list specific transactions, not as genuine physical coins that can be carried and swapped. A
digital depiction of worth that is only accessible in electronic form is called a virtual money.
Through certain computer, mobile, or software apps, it is stored and transacted. Virtual
currency exchanges take place through secure, specialised networks or the Internet. The
majority of the time, they are uncontrolled and granted by private individuals or groups of
developers. Digital currencies, such as cryptocurrencies and tokens produced by private
companies, are included in the category of "virtual currencies," which is a subset of all digital
currencies. The simplicity of use and shorter transaction times of virtual currency are
benefits. Virtual currencies have the drawbacks of being hackable and offering investors little
in the way of legal remedies due to their lack of regulation. Digital wallets are where
cryptocurrency is kept. Cryptocurrency has acquired its name because transactions are
encrypted and validated. This implies that complex programming is required for the storage,
transport, and recording of bitcoin data to public ledgers. The purpose of encryption is to
provide security and protection. The first cryptocurrency, and still the most well-known
today, was invented in 2009: Bitcoin. Trading for financial gain accounts for a sizable
percentage of interest in cryptocurrencies, with speculators periodically driving prices over
the roof. There are two main categories of virtual currencies, centralised and decentralized, in
terms of their legal status:
1. Centralized virtual currencies are those that have a single administrator or repository. The
central administrator of a virtual currency is often the currency's issuer. The function is
comparable to that of a central bank in a controlled monetary system. Centralized virtual
currencies include XRP.
2. Decentralized: In contrast, a decentralised currency lacks a central administrator or
repository that is controlled by a third party. The transactions of a decentralised virtual
currency will be authenticated by a distributed system instead. Blockchain networks like
those used by Bitcoin, Litecoin, and Ethereum are the foundation of many decentralised
currencies. In a blockchain network, blocks of data are combined with encryption. As
requests for transactions are made, they are distributed throughout the network of many
computers. (nodes). A permanent and unchangeable block containing the transaction data is
added to the current blockchain when the transaction has been validated by the network. The
transaction is finished, and it is recorded as such. The decentralised peer-to-peer network
lacks a central administrator, and hence avoids a centralised security failure, as comparison to
a centralised virtual currency system. Decentralization also promotes cheaper transaction
costs and more party transparency because there are no middlemen involved. However, the
lack of a centralised authority raises issues with regulation. The decentralised system is
advantageous for money laundering and other criminal activities.
Convenience is a major benefit of virtual currency. Making payments using virtual currencies
is quick and easy because they are network-based. Using virtual money is very useful for
international transactions. Decentralization also steers clear of middlemen. It reduces
transaction costs and prevents the central administrator's security failure. Virtual money is a
type of uncontrolled digital currency. It is issued and managed by a private issuer rather than
a central bank. As a result, it is independent of any monetary policies. There are two types of
virtual currencies: centralised and decentralised. Some virtual currencies employ encryption,
while others do not. A digital or virtual money that uses cryptography for security and runs
without the aid of a central bank is referred to as virtual currency, also known as
cryptocurrency. Blockchain technology, a decentralised ledger, is used to verify and record
virtual currency transactions. Here is an illustration of how virtual currency functions:
Let's use an example where Alice wants to transfer Bob some digital money, like Bitcoin. The
blockchain ledger is maintained by a network of computers, and Alice would start a
transaction and publish it to the Bitcoin network. The transaction would then be verified by
network miners, who add it to the blockchain, a permanent and impenetrable record of all
Bitcoin transactions. Because virtual currencies are susceptible to hacking, fraud, and other
forms of cyberattacks, security is a top priority. Virtual currency platforms and exchanges
employ a variety of security methods, including multi-factor authentication, encryption, and
cold storage of funds, to maintain security. Virtual currencies have received a lot of interest
and attention recently because to their potential to upend established financial systems,
despite it being difficult to forecast their future. Virtual currencies have various benefits,
including cheaper and quicker transactions, increased anonymity, and global exchanges.
However, they also have major difficulties like regulatory ambiguity and instability. In the
foreseeable future, it's unlikely that digital currencies will totally replace paper money
because they still have a lot of problems to overcome, like regulatory issues and a lack of
mass adoption. Virtual currencies could, however, become more commonly recognised and
used in the future as technology develops and more people get familiar with them.
Conclusion:

Unlike money backed by the government, the value of virtual currencies is entirely decided
by supply and demand. Due to these volatile movements, investors may experience
significant profits or losses. Additionally, government regulation of cryptocurrency assets
occurs far less often than it does for traditional financial products like stocks, bonds, and
mutual funds. Because of the market's extreme volatility, be ready for ups and downs. A
digital depiction of worth that is only accessible in electronic form is called a virtual money.
Through certain computer, mobile, or software apps, it is stored and transacted. Virtual
currency exchanges take place through secure, specialised networks or the Internet. The
majority of the time, they are uncontrolled and granted by private individuals or groups of
developers. Digital currencies, such as cryptocurrencies and tokens produced by private
companies, are included in the category of "virtual currencies," which is a subset of all digital
currencies. The simplicity of use and shorter transaction times of virtual currency are
benefits. Virtual currencies have the drawbacks of being hackable and offering investors little
in the way of legal remedies due to their lack of regulation. There will be substantial changes
in price. Cryptocurrency might not be the best option for you if your investment portfolio or
mental health can't manage that.
Ques 2

Introduction:

To make it simpler to clear and resolve financial transactions involving money and other
assets, systems for payments and settlement have been created. Safe, affordable, and
accessible payment mechanisms encourage development, maintain financial stability, and
increase financial inclusion. The financial technology infrastructure of a nation's payment
systems ensures smooth and efficient operation of all financial and commercial activities.
These payment systems link a nation's financial operations to the world economy. Online
purchases are routinely made in India using credit and debit cards. Customers of VISA,
Mastercard, American Express, and RuPay receive adaptable, Omni-banking vendor
assistance. These banking card providers offer top-tier PCI DSS-compliant services in
addition to two-factor authentications that include PIN and OTP verification. As a consumer,
you can quickly and securely pay for both your online and offline transactions. Customers
can benefit from valuable perks like no transaction costs. Additionally, transaction restrictions
aid in the regulation of EMI and other recurring bill payments. Cash Withdrawal, Cash
Deposit Services, and Balance Inquiry are additional C2B to C2G payment processes. Cash is
still a preferred method, particularly following India's demonetization. The unbanked
population still uses paper money, which is the oldest and most reliable form of currency,
thus it would be inaccurate to state that paper finance has fully disappeared from the Indian
economy. Large- and small-scale industries that lack a digital payment infrastructure for their
vendors typically use cash payments. Numerous payment gateway companies in India offer
safe contactless payments using mobile wallets and QR scans. Micro ATMs are a great
substitute that have been quickly adopted nationwide for contactless payment. You can relax
knowing that each of these services works seamlessly with various banking providers. Mobile
contactless payments, however, need a device that can take and process payments. This
payment trend is being fueled by extra perks including one-touch payments for common
retail locations and omnichannel FinTech service aggregation.

Concept and application:

A third-party organisation called a payment service provider (PSP) helps businesses accept
electronic payments including debit and credit card payments. PSPs serve as a middleman
between those who take payments, such as retailers, and those who make them, such as
customers. PSPs create technological ties between acquiring banks and card networks,
allowing businesses to accept a variety of payment options without having to engage with a
specific bank. They fully oversee payment processing and connections to external networks,
reducing the merchant's reliance on banks. For card- and bank-based payments, PSP can also
include transaction payment matching, reporting, fund remittance, fraud prevention, and risk
management services. Other next-generation methods (payment systems), such as cash
payments, wallets, prepaid cards or vouchers, and even paper or e-check processing, are
handled by some PSPs. The top payment gateways make accepting and processing credit and
debit card payments online quick and straightforward. A digital wallet is a software-based
platform that enables users to conduct electronic transactions including bill payments,
cellphone recharges, and reservations for movies and travel. Digital wallets offer a practical
and safe replacement for traditional wallets by enabling the transfer of funds across bank
accounts. People may access their financial data and conduct purchases using a digital wallet
instead of cash or credit cards. However, because monthly fees can reduce income more than
processing fees, you might discover that if sales volume hits a certain point, paying a monthly
price for merchant processing plus interchange fees becomes more cost-effective. Some of
the top payment gateways provide both possibilities or a comparable competitive edge.
Depending on the card type, this could take the form of processing fees or even a direct link
with accounting software. With the help of payment gateways, you can accept card payments
both online and offline. Both online and offline credit card payments can be processed
quickly and easily using the. Systems for payment gateways also provide in-store Point of
Sale (POS) processing.

The following procedures are often included in payment services:

 Authorization entails confirming that the payment method is legitimate and has
enough money on hand to cover the transaction.
 Payment transfer from the customer's account to the merchant's account is known as
settlement.
 Reconciliation entails comparing the transactions to the accompanying payments to
make sure everything is in order.
 Fraud detection and prevention: This entails keeping an eye on transactions for
indications of fraud and taking steps to stop it.
Several well-known payment gateway companies are:
 PayPal
 Stripe
 Square
 Authorize.net
Let's take a closer look at Stripe, a well-liked payment gateway utilised by numerous
companies. Businesses can accept credit card and debit card payments online using the
payment gateway Stripe. This is how it goes:
On the merchant's website, the customer chooses a good or service and enters their payment
information. To process the payment, the data is sent securely to Stripe. The payment details
are checked by Stripe, who also approves the transaction. By moving money from the
customer's account to the merchant's account, Stripe settles the transaction. For the purpose of
reconciliation and reporting, Stripe gives the merchant real-time transaction data. Numerous
connections and capabilities are available through Stripe, such as support for several
currencies, scalable payment forms, and fraud prevention measures. Additionally, it provides
a subscription management function that enables companies to control subscriptions and
recurring payments. In general, Stripe is a trustworthy and easy-to-use payment gateway that
is suitable for companies of all sizes. The first step in the online payment process is the
payment gateway, and it has been essential in making it easier for e-commerce businesses and
online payment providers to accept online transactions. For online and mobile sellers, the
finest payment gateways act as the front-end processor and online equivalent of a payment
terminal. Payment acceptance, data reporting, and fraud control are frequently sold as
packages.

Conclusion:

The way the payment gateway sector is expanding has changed as a result of the development
in digitalization, contemporary technology, and the widespread availability of mobile devices.
A third-party organisation called a payment service provider (PSP) helps businesses accept
electronic payments including debit and credit card payments. PSPs serve as a middleman
between those who take payments, such as retailers, and those who make them, such as
customers. This led to the creation of numerous electronic or mobile wallets. Indian mobile
wallets come in a variety of forms, including open, semi-open, semi-closed, and closed,
depending on how they are used and how payments can be processed. Since e-commerce
businesses and all online marketplaces have connected with such mobile wallets to make
transactions seamless, the use of digital wallets is expanding quickly since they help to
increase transaction speed. An e-commerce application service provider's payment gateway is
a merchant service that permits credit card or direct payment processing for online shops,
bricks and clicks, and traditional brick and mortar stores. Mobile contactless payments,
however, need a device that can take and process payments. This payment trend is being
fueled by extra perks including one-touch payments for common retail locations and
omnichannel FinTech service aggregation.
Ques 3(a)

Introduction:

The percentage of online shopping carts that clients leave unattended before making a
purchase is referred to as the cart abandonment rate. This metric is generated by multiplying
by 100 and dividing the total number of shopping carts produced by the number of completed
purchases. High cart abandonment rates can be a serious issue for online retailers since they
show that customers are running into difficulties or obstacles while trying to complete their
purchases. Loss of revenue and a decline in client loyalty may follow. A digital wallet is a
software-based platform that enables users to conduct electronic transactions including bill
payments, cellphone recharges, and reservations for movies and travel. Digital wallets offer a
practical and safe replacement for traditional wallets by enabling the transfer of funds across
bank accounts. People may access their financial data and conduct purchases using a digital
wallet instead of cash or credit cards. Businesses can take a number of actions to lower cart
abandonment rates, including:
 Streamlining the checkout procedure by removing stages that aren't necessary and
making it simpler for customers to make their purchases.
 Guest checkout is available: Allowing clients to check out without having to create an
account can frequently act as a disincentive.
 Providing clear information: Making certain that clients are given clear information
regarding the products they are purchasing, the delivery options available, and the
overall cost of their purchase, including any taxes or fees.
 Making sure that your website is mobile-friendly so that clients may simply finish
their transactions on their smartphones or tablets.
Using digital wallets can streamline the payment process and cut down on the steps users
need to take to complete their purchases. Examples of such digital wallets are PayPal, Apple
Pay, and Google Wallet.

Concept and application:

A digital wallet is a software-based platform that enables users to conduct electronic

transactions including bill payments, cellphone recharges, and reservations for movies and
travel. Digital wallets offer a practical and safe replacement for traditional wallets by
enabling the transfer of funds across bank accounts. People may access their financial data
and conduct purchases using a digital wallet instead of cash or credit cards.
 Simplify the checkout procedure: Make it simpler for customers to finish their
purchases by eliminating extra stages from the checkout procedure.
 Provide guest checkout: Do not force customers to register for an account, as this is
frequently a deterrent. Instead, let them to check out as guests.
 Make sure customers have access to clear information about the products they are
purchasing, the shipping options available, and the final price of their order, including
any applicable taxes or fees.
 Make sure your website is mobile-friendly so that clients can simply finish their
transactions on their smartphones or tablets.
 Utilize digital wallets: Providing digital wallet payment choices is one approach to
streamline the checkout process and lower cart abandonment rates. Customers may
quickly and easily make purchases using digital wallets like PayPal, Apple Pay, and
Google Wallet while also securely storing their payment information. You can
 decrease the amount of steps customers must take to complete their purchase by
providing these payment choices, which may result in fewer abandoned carts.

Conclusion:

You must integrate your website with the provider's payment gateway in order to enable
payment alternatives using digital wallets. In order to make sure that your website can safely
take payments from the digital wallet, this procedure often entails working with a payment
processor or payment gateway provider. A digital wallet is a software-based platform that
enables users to conduct electronic transactions including bill payments, cellphone recharges,
and reservations for movies and travel. Digital wallets offer a practical and safe replacement
for traditional wallets by enabling the transfer of funds across bank accounts. People may
access their financial data and conduct purchases using a digital wallet instead of cash or
credit cards.
Ques 3(b)

Introduction:

A payment instrument for storing money, mobile payments, transfers, and online payments is
known as an electronic wallet (EC), or, more precisely, an electronic means of payment.
You've probably heard mobile wallets or digital wallets referred to by various names. In
actuality, these digital wallets are like to bank accounts; the difference is that the money is
kept in a specialised computer programme rather than a bank. It is practical for freelancers
like programmers, designers, copywriters, and teachers as well as those who enjoy internet
shopping. For those who are concerned about the security of cash in a bank account,
transferring the needed sum to an e-wallet and making a payment or transfer through it will
prevent scammers from accessing the bank account because this is a crucial step in the
development of eWallet apps. Using an e-wallet for foreign transfers is also practical.
Additionally, transfers are instantaneous and the e-wallet commission may be lower. Users
can store, manage, and use their financial assets, such as bank account information, credit or
debit cards, and cryptocurrencies, using a digital wallet, which is a software programme. A
digital wallet is a software-based platform that enables users to conduct electronic
transactions including bill payments, cellphone recharges, and reservations for movies and
travel. Digital wallets offer a practical and safe replacement for traditional wallets by
enabling the transfer of funds across bank accounts. People may access their financial data
and conduct purchases using a digital wallet instead of cash or credit cards. A digital wallet
may have the following features that are useful to companies:
Payment processing: A digital wallet should enable users to pay with their saved payment
methods directly from the wallet.
Security: The digital wallet needs to have strong security measures in place to safeguard
users' private financial data. Features like encryption and multi-factor authentication can aid
in ensuring the wallet's security.
Programs that reward users for using the wallet to make purchases can be integrated with the
wallet.
Integration with other third-party apps: The wallet can be connected to other third-party apps
like expense trackers, accounting software, and tax preparation software.
Simple integration: To guarantee a flawless user experience, the digital wallet should be
simple to incorporate into your website or mobile application.

Concept and application:

A digital wallet is a software-based platform that enables users to conduct electronic

transactions like bill payments, mobile recharges, and reservations for movies and travel.
Digital wallets offer a practical and safe replacement for traditional wallets by enabling the
transfer of funds across bank accounts. People can access their financial data and conduct
purchases using a digital wallet instead of cash or credit cards. The conventional means of
conducting transactions with cash and loose money have been replaced by technological
innovations. Nowadays, smart phones have cleverly and digitally taken over the functions of
checks, credit and debit cards, etc. People have begun adopting mobile payment apps like
Paytm for regular purchases with the advent of digital wallets. One of the most well-known
payment applications, Paytm, is leading the way by enabling users to send money more
quickly, intelligently, and securely via digital wallets and UPI.6
Users are able to quickly and easily make payments online using digital wallets.
Digital wallets can be used for a variety of transactions, including ordering gas cylinders,
paying power bills, recharging mobile devices, and booking train or aeroplane tickets.
A user must first add money from a connected bank account before they may utilise a digital
wallet.
Digital wallets can be used for a variety of transactions and are safe to use.
An internet connection, a smartphone, and the Paytm payment app are requirements for using
a digital wallet to conduct transactions. A digital wallet is a software-based platform that
enables users to conduct electronic transactions including bill payments, cellphone recharges,
and reservations for movies and travel. Digital wallets offer a practical and safe replacement
for traditional wallets by enabling the transfer of funds across bank accounts. People may
access their financial data and conduct purchases using a digital wallet instead of cash or
credit cards.
Conclusion:

The conventional means of conducting transactions with cash and loose money have been
replaced by technological innovations. Nowadays, smart phones have cleverly and digitally
taken over the functions of checks, credit and debit cards, etc. People have begun adopting
mobile payment apps like Paytm for regular purchases with the advent of digital wallets. One
of the most well-known payment applications, Paytm, is leading the way by enabling users to
send money more quickly, intelligently, and securely via digital wallets and UPI. A digital
wallet is a software-based platform that enables users to conduct electronic transactions
including bill payments, cellphone recharges, and reservations for movies and travel. Digital
wallets offer a practical and safe replacement for traditional wallets by enabling the transfer
of funds across bank accounts. People may access their financial data and conduct purchases
using a digital wallet instead of cash or credit cards. Digital wallets are a common option for
customers due to a variety of benefits. The capacity to conduct transactions, move funds, and
have access to payment history are often included in these characteristics, though they may
differ depending on the particular payment application. Additional benefits offered by certain
digital wallets include the capacity to conduct transactions from any location and the ability
to make payments both online and in-person.