CHAPTER 1

1.1INTRODUCTION TO DIGITAL PAYMENTS

The Payment and Settlement Act, 2007 has defined Digital Payments as any transfer of money or
funds which is made by any individual through instruction, approval or order - 2 - to a bank for
debiting or crediting an account kept with that bank with using electronic ways and includes Debit
and credit card payments; Automated Teller Machine (ATM) transactions, Point Of Sale (POS)
transfers or micro ATMs, direct deposits or withdrawal of money, Mobile Payments, Net Banking
etc.

Shree DV et al. 2015, defined Digital Payment System as an electronic device which lets an
individual in making electronic commerce transactions and purchasing products online. It also aids
digital wallets which are linked to the person’s bank account and can be used to store payment data
thereby eliminating the requirement of re-entering the information again and again whenever the
m-payment needs to be made

There are several types of digital payments, including mobile payments, online payments, and
peer-to-peer payments. Mobile payments allow users to make payments through their mobile
devices, often using near-field communication (NFC) technology or mobile apps. Online
payments, on the other hand, enable users to pay for goods and services on the internet through
credit or debit cards, digital wallets, or bank transfers. Peer-to-peer payments allow individuals to
transfer money to each other directly, often through mobile apps or online platforms.

Digital payments offer several benefits, including convenience, speed, and security. Consumers
can make payments at any time, from anywhere, and businesses can receive payments faster and
more efficiently. Digital payments also reduce the need for physical cash, which can reduce the
risk of theft and fraud.

However, there are also risks associated with digital payments, such as hacking and identity theft.
It is important to take appropriate measures to protect personal and financial information when
making digital payments, such as using secure websites and apps, monitoring bank accounts

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regularly, and setting strong passwords. By 2023, it is anticipated that 66.6 billion transactions total of
$270.7 billion in India will switch from cash to cards and digital payments.

Overall, digital payments are an increasingly popular and convenient way to make payments, and
with proper precautions, they can be a safe and secure option for consumers and businesses.

Digital payments are ones made via digital or internet channels without the exchange of actual money. Such
a payment, which is sometimes referred to as an electronic payment (e-payment), occurs when money is
transferred from one payment account to another in which both the payer and the payee utilise a digital
device, such as a cell phone, computer, credit, debit, or prepaid card.

A person or a firm could be the payer and payee. This means that in order for digital payments to
be made, both the payer and the payee must have a bank account, an online banking method, a
device from which they can make the payment, and a medium of transmission. To meet these
requirements, both parties must have signed up with a payment provider or an intermediary, such
as a bank or service provider.

Both online and in-person transactions for digital payments can be made to the payee. For instance,
both digital payment transactions would occur if a customer made a purchase from a local grocer
and paid him over UPI while doing so in-person.

Digital payments can be made using a variety of methods, including mobile wallets, PoS terminals,
NEFT, AEPS, and UPI. Having surpassed the threshold of $1 trillion in transaction value, UPI is
the most popular mechanism. According to a research by "The Economic Times," as more users
and businesses use it, internet transactions have increased by 76% since 2020. By 2025, digital
payments will account for 71.7% of all transactions.

Reserve banks are crucial in India. The RBI of India, which serves as the nation's Central Bank and
plays a critical role, has taken numerous measures to create a solid, safe, efficient, and secure
system. The "Payment and Settlement Systems Act" governs payment systems in India (PSS Act).
For the purpose of establishing and modernising the nation's safe payment system, the PSS Act
was passed into law in December 2007. A different approach has been used by the central bank.
The country's predominant characteristics of its wide geographic dispersion and the extensive
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network of Indian banking system branches need the logistical collecting and distribution of paper
instruments.

1.2 EVOLUTION OF DIGITAL PAYMENTS

With the introduction of electronic payment systems in the late 20th century, the development of
digital payments began to take place gradually.

The following major turning points in the development of electronic payments:

1. Electronic Funds Transfer (EFT) is a method for moving money electronically between
bank accounts that was originally developed in the 1970s.
2. Credit and debit cards were introduced in the 1980s and 1990s, marking a significant
advancement in the development of digital payments. Due to the convenience of making
transactions without cash, these cards quickly overtook other forms of payment.
3. Online Payments - In the 1990s, as the internet expanded, online payments began to catch
on. When PayPal was first offered in 1998, users could send and receive money online.
4. Mobile payments have become more popular as smartphones have become more common.
With the help of apps like Apple Pay, Google Wallet, and Samsung Pay, customers may
use their cell phones to make purchases by tapping or scanning.
5. Digital payments have been transformed by cryptocurrencies like Bitcoin, which were
originally released in 2009 and provide a decentralised, safe, and quick payment
mechanism independent of conventional financial institutions.
6. Contactless Payments - In recent years, contactless payments have gained popularity,
allowing customers to make purchases by merely passing their cards or mobile devices in
front of a payment terminal. As a safer and hygienic substitute for cash during the COVID-
19 pandemic, this technology has been widely used.

The development of digital payments has been influenced by both changes in consumer behaviour
and technological advancements. We can anticipate more advancements in digital payments as
technology develops, making consumer transactions quicker, safer, and more practical.
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1.3 GROWTH OF DIGITAL PAYMENTS
Growth of Digital payments India is experiencing a rapid growth in digital payments and
because of the internet growth and mobile penetration, the coming years will experience a
massive rush in the adoption of digital payments. The announcement of demonetization of
high currency notes on 08 November 2016 for curbing the black money out of the economy
and for fighting against corruption had also significantly impacted the adoption of digital
payments as an alternative to cash in India.
Other incentives also proved to be efficient in this run such as development of BHIM (Bharat
Interface for Money) app, one touch payments, and facilitation by non-banking financial
institution or a persuasion by government either by means of providing inducements or tax
breaks, (Singh & Rana, 2017, Chattopadhyay et al., 2018). Digital payments in India are
projected to be determined by four trends which are also expected to impact how the digital
payment is likely to look in the future.
Four drivers include India going digital, constructive regulatory framework, increase of next
generation service providers and lastly the improved customer experience (Sumathy & KP,
2017). From November 2016, India has experienced various events such as demonetization,
low cost Internet by a number of telecom service providers, discounts and cash backs by
various digital payment service providers and related government regulations (Pal et al. 2018).
Over the past five years, India has demonstrated a sheer movement in digital payments. RBI
report titled ‘Assessment of the progress of digitization from cash to electronic’ has stated that
“Within the digital payments, retail electronic payments involving credit transfers such as
NEFT, IMPS and UPI and direct debits such as ECS, NACH have demonstrated a rapid
growth at a Compound Annual Growth Rate (CAGR) of 65% in terms of volume and 42% in
terms of value. Whereas the stored value cash issued in the - 4 - form of wallets and prepaid
cards demonstrated an increased adoption with a CAGR of 96% in terms of volume and 78%
in terms of value.”

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1.4 REASONS TO SELECT DIGITAL PAYMENTS

There are various reasons for which people are using digital payments rather than cash. Few are
explained below:

 Convenient and Flexible: Because of digital modes, now people do not require to carry cash
with them every time they go out of their house to purchase anything or wait in long queues
outside the ATMs for getting cash. Moreover they do to have to be physically present
which means by using digital payments one can pay from anywhere at any point of time.
They need not worry about the cash outs at bank holidays.

 Cost Saving: Digital payment modes are proven to be cost savers not only for banks but
also for customers. Lower Risk: Digital payment modes are more secured and have lower
risk as compared to transactional payment modes because these are processed with secured
payment - 5 - gateways which are difficult to tamper with. Also in the cases of theft, a
digital payment instrument can be blocked immediately.

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  Easily Traceable: Transactions’ information and details are stored in the database. Users
can easily access that payment information which avoids any type of confusion. Also
because of this, consumers can observe their spending and try not to spend more than the
required.

 Discounts and Cash Backs: Going digital can help the customers to avail cash backs and
various discounts on the buying of their products and services. However these are capped to
an amount beyond a certain limit.

1.5 VARIOUS MODES OF DIGITAL PAYMENTS

DIGITAL
PAYMENTS
MODES

BANKING POINT OF SALE UPI APPS USSD & AEPS MOBILE & MOBILE
CARDS MACHINE S) INTERNET WALLETS
BANKING

1. Banking Cards:

Banking cards are plastic cards supplied by financial organizations that let consumers access
their bank accounts to make purchases, withdraw cash, or send money electronically. They are
also known as payment cards, debit/credit cards, or payment cards. These cards frequently have

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 a chip or magnetic stripe that saves account information and enables the card to be read by
electronic card readers.

Debit cards are used to make purchases at retailers, withdraw cash from ATMs, and send
money online. They are linked to a customer's checking or savings account. Typically, in order
to authorize transactions, a PIN code must be submitted.

On the other hand, credit cards give users the option to borrow money from a financial
organization in order to make purchases and subsequently repay the loan over time, frequently
with interest. The maximum amount that can be borrowed from them often has a credit limit,
and in order to avoid late fees and penalties, the customer is typically required to make at least
the minimum monthly payment.

Advantages:

 Cash can prevent against misuse in addition to helping with card payments, making it
highly convenient.
 A debit card can be obtained by anyone with a bank account.
 Unlike a credit card, a debit card limits a user's spending to the amount that is available in
his account. You should be aware of these 5 debit card benefits.

Limitations:

 A person's personal credit is ineffective when using a debit card.

 The bank imposes a variety of fees and levies on debit cardholders.
 If a person's card is lost occasionally, there may be a risk.

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 Table 1.1 Comparison between Debit Card and Credit Card

Basis Debit Card Credit Card

Issuing Body Issued by banks to the Issued by Banks and
account holders Financial institutions on
the basis of line of credit

Source of funds The saving account or Fund is borrowed from

current account of the the lending institution that
individual individual needs to
pay each month
Spending limit One can spend the amount One can spend more than
available in his bank what he actually has
account
Interest No interest is charged as Cardholder requires
no borrowing is being done paying the interest on the
amount of funds
Borrowed.
Credit score It does not have any effect Payments have an effect

on one’s credit score on the credit score

Fee and charges The cardholder just The cardholder needs to

requires to pay nominal pay multiple charges
annual fee and PIN including joining fee,
regeneration charges annual fee and others

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 2. USSD [Unstructured Supplementary Service Data]:

Unstructured supplemental service data is referred to as USSD. This is one of the top mobile
banking services for people with low incomes. To complete a mobile transaction, this type of
payment can be utilised without downloading an app. This method does not require a mobile
data facility. This approach offers features including balance inquiries, bank statements, and
fund transfers.

Services offered:

 Financial service i.e. transferring of funds.

 Non-financial services i.e. Generating M Pin, changing M Pin, Balance enquiry and
generating Mini statement.

Advantages:

 USSD has a very low or negligibly low cost.

 This system responds quickly and accurately.
 You might use this as a consumer-driven payment system.
 Because this method uses an automatic answer, customers must wait.
 This approach is suitable for widespread use.
 It is real-time and location-based, among others. (USSD Advantages: 10 Arguments in
Favor of Its Usage by Companies, 2019)

Limitations:

 The massage cannot be saved or forwarded using this manner.

 Unlike other widely used short codes, the USSD code is not simple to remember.
 It's occasionally unreliable owing to session-based timeouts.

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3. AEPs [Aadhar Enabled Payment System]:

AEPs are a way to withdraw funds from a bank account. Aadhar data is utilised for
authentication purposes in this context. For a variety of banking transactions, including cash
deposits, cash payments, cash withdrawals, balance inquiries, and fund transfers, among others,
from bank AEPs. Aadhar verification is used in all financial operations. With this technique,
there is no need to visit a branch, provide card information, or sign any paperwork. With a
valid Aadhar number, it is quite easy to use.

Services offered:

 Balance enquiry

 Cash deposit

 Cash withdrawals

 Mini Statement

 Aadhar to Aadhar Fund Transfer

Procedure for using AEPS:

1. Visit the nearest Micro ATM or bank Correspondents with Aadhar card Number.

2. Provide 12-digit Aadhar number and bank name.

3. Select the type of transaction that needs to be made. Also enter the amount of
the transaction.
4. Transaction is authenticated by scanning fingerprints through biometric.
5. Collect the receipt.

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Advantages:

 Because fingerprints cannot be faked, AEPs are extremely quick and secure.
 Neither a debit card nor a signature are necessary with this approach. With correspondent
accounts, there is no need to go to the bank.
 For AEPs transactions, the person must supply their Aadhar number, bank IIN, or name and
fingerprint. UIDAI may impose a small fee for offering these services.
 The union government covered all AEP costs up until December 31, 2019, which is the
most significant factor. Thus, AEP transactions were free prior to then.

Limitations:

 If banking information is linked to Aadhar information, there is a possibility that

information or details could be misused or disclosed. Also, it might lead to a significant
issue.
 Because Aadhar data are maintained by private companies, the privacy of the individual
may be compromised.
 This strategy is difficult to utilise because a sizable section of the population still lacks
literacy, and as a central authority that may create new rules & regulations operates, it may
have an impact on cardholders.

4. Unified Payments Interface (UPI):

The National Payments Corporation of India created the real-time payment system known as
UPI, or Unified Payments Interface (NPCI). UPI enables customers to immediately transfer
money between bank accounts using a mobile device without disclosing sensitive informati on or
bank account information.

A virtual payment address (VPA), which serves as a special identification for the user's bank
account, can be linked to a user's bank account using UPI. Users can then use the VPA to send

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 money to other users who also have bank accounts that support UPI or to make payments to
them.

UPI transactions can be started and finished with the help of a mobile app, and because they are
processed in real-time, the recipient receives the payments nearly immediately. Because of this,
UPI is a very practical and effective payment option for both individuals and companies.

Procedure for sending money through UPI:

For receiving and making payments through UPI, one just needs a bank account and a
smartphone. The following steps are needed to be taken for making payments through
UPI:

1. Download the UPI App of your choice. Link the App with the bank account.

2. A unique Id is generated after the registration is made. This Id is linked to the

individual’s bank account. Also for each bank, a different Id is generated, so that
the user can select the preferential bank from which he needs to pay.
3. After registration, login with the same credentials. Enter the Unique Id of the
person or entity to whom the payment needs to be made and choose send. The
transaction is authenticated once the Pin or Password is entered.

Advantages:

 The cheapest and free way to transfer money is through UPI.

 By adopting UPI, it will cut down on trips to the ATM and relieve users from having to
carry cash.
 Information like credit card numbers or bank account information are not required.
Information about the account must be provided. A user must enter an easy-to-remember
virtual payment address.
 Compared to other digital payment methods, UPI is more secure because it does not require
information like a card number or CVV.
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  UPI methods offer immediate transfers because they operate around-the-clock and on all
days of the year. Strikes at banks or their peculiar hours won't stop a transaction.
 A single UPI app can manage numerous accounts.
 UPI offers a money collection service as well, which sends money to parties.
 UPI has mostly replaced digital wallets since it is less expensive.

Limitations:

 UPI transactions require a stable internet connection to function properly. Poor connectivity
or network outages can disrupt UPI transactions and cause delays.
 UPI imposes certain transaction limits, such as a maximum transaction amount per
transaction and per day. This can be a limitation for businesses and individuals who need to
make larger transactions.
 While many banks and financial institutions in India offer UPI-enabled apps, not all banks
are part of the UPI network. This means that some users may not be able to use UPI for
transactions.
 Many users may not be aware of the proper procedures for using UPI or may not be
comfortable with using technology for financial transactions. This can result in errors and
delays in transactions.

5. Mobile Wallet:

To utilise a mobile wallet, a user must download an app. A mobile wallet can hold many pieces
of information, including encoded account and card information. The mobile wallet can be
used for payments and purchases, but first, one must add funds to his virtual wallet. There are
many mobile wallet apps accessible in the nation, including Paytm, MobiKwik, which is free.
For the service provided, there can be a transaction fee. A mobile wallet is secure. Compared to
physically swiping cards, it is safer.

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Procedure for using Mobile wallets:

 Download the required app. Register using the mail id or phone number.

 Add money to the wallets through debit card, credit card or net banking. Once money is added, it
can be utilized for making payments and transfers.

 For making the payment, select the type of transaction, amount and beneficiary. And payment is
authorized by entering the OTP sent to the registered mobile number.

Advantages:-

 Customers find it more convenient, and a mobile wallet is more affordable because no
intermediaries are needed.
 It saves money because there is no need to maintain an expensive POS system.
 Mobile wallets can be accessed from anywhere, at any time, as long as the user has an
internet connection. This makes it easier for users to manage their finances, pay bills, and
make purchases, regardless of their location.
 Many mobile wallets offer rewards and incentives, such as cashback, discounts, and loyalty
points, for using their services. This can help users save money and earn benefits while
making payments.

Limitations:-

 Mobile wallets are not accepted everywhere, and not all merchants have the infrastructure
to accept mobile wallet payments.
 Mobile wallets may not offer all the features and services that are available with traditional
bank accounts, such as cheque deposits and ATM withdrawals.

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  Mobile wallets require a stable internet connection and a compatible device to function
properly. Technical glitches or network outages can disrupt transactions and cause
inconvenience to users.
 Mobile wallets are vulnerable to fraud and hacking, which can result in the loss of funds or
sensitive information. Users need to take appropriate security measures, such as setting
strong passwords and avoiding using public Wi-Fi, to prevent such incidents.

6. Prepaid banking cards:

It require money to be loaded in order to be used for purchases. The debit card and the
customer's bank account must be linked; the bank account may not be linked with a card. A
depository account may be at risk via a banking card. There are many different kinds of cards,
including credit cards, debit cards, and ATM cards. Plastic cards with magnetic stripes are
issued by banks. This card contains an identification code that a machine will read. The card
that banks issue contains the client's name, the name of the issuer, and the card number. The
first bank card was issued by Barclays in London.

Advantages:

 Benefits include the fact that bank-prepaid cards do not require a credit check and that
banks cannot provide credit, preventing debt accumulation.
 Prepaid credit and debit cards are functional.
 A lot of prepaid cards provide cashback advantages.

Limitations:

 Prepaid card usage costs are collected in a number of ways.

 Even though it functions like a debit and credit card, it is not one.
 Prepaid cards cannot be used in transactions where pre-authorization is required.

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 7. PoS terminal [Point of Sale Terminal]:

A portable gadget known as a PoS Terminal, or point of sale terminal, can read credit cards. It
is set up so that debit and credit cards can be used to make purchases. Several POS terminal
types include physical POS, mobile POS, and virtual POS. Holden, 2021

Advantages:

 It simplifies the accounting process, gives detailed sales data, lowers staff turnover, and
makes managing employee work schedules easier.
 Its controls and user error reduction.
 It offers concise receipts and is extremely quick. 2018's Kanaya.

Limitations:

 POS systems can be expensive to purchase and install, especially for small businesses. The
cost of hardware, software, and maintenance can be a significant investment for businesses.
 POS systems require a stable internet connection and proper maintenance to function
properly.
 Some POS systems may not support all types of electronic payments, such as mobile
wallets or cryptocurrency.
 Merchants need to take appropriate security measures, such as using encryption and strong
passwords, to prevent such incidents.

8. Internet banking:

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 The practise of doing financial transactions online is called as internet banking. It is also
referred to as virtual banking or e-banking. Online fund transfers use NEFT, RTGS, or IMPS.
It is a service provided by banks and financial institutions that allows customers to access their
bank accounts and conduct financial transactions over the internet.

1. Net Banking (NEFT/RTGS/IMPS):

They are among the most popular, commonly used and fastest money transfer internet
banking services in India by which one person can transfer money between two banks.

 NEFT (National Electronic Fund Transfer)

It is a payment system that enables a person to transfer funds from one bank to
another. This service is maintained by RBI (Reserve Bank of India). There is no
maximum and minimum limit on the amount of money which can be transferred
through NEFT in a single day. However, only ` 50,000 can be transferred per
transaction. Moreover the transfers of funds do not happen on a real time basis
and funds transfer settlement takes place in 23 half-hourly batches. This service
is unavailable on Sundays and on bank holidays and if any transfer is initiated
after the specified hour, the same will be processed on the next working day. It is
a very commonly used service in India as it is a time saving and safe method.

 RTGS (Real Time Gross Settlement)

It is a payment system in which transfer of funds takes place between two banks
on a real time basis. In India, this service of internet banking is among the fastest
services for transferring money. After receiving fund transfer message, receipts
must be credited within 30 minutes by the receiver bank. This service is also
maintained by RBI. There is no upper limit on the amount which can be
transferred through RTGS, although a minimum of ` 2 Lakhs needs to be
transferred per transaction. This service is more popular among business owners
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 who need to transfer large amounts of money instantly. It is predominantly meant
for large transactions having larger values which require immediate clearing. It is
more preferable in comparison to NEFT as the transfer of funds happen on a real
time basis. This service is also unavailable on Sundays and on bank holidays.

 IMPS (Immediate Payment Service)

It is also a real-time payment service which allows an instant 24*7 transfer of funds
electronically. This service is offered by NPCI (National Payment Corporation of India).
This service has the best features of both NEFT and RTGS, using IMPS one can transfer
even smaller amounts, instantly. There is no minimum limit on the amount of money
which anyone can transfer through NEFT but the maximum limit is ` 2 lakhs. This
service is available on 365 days, even on Sundays or bank holidays.

Table 1.2: Comparison among NEFT, RTGS and IMPS

Basis NEFT RTGS IMPS

Governing body RBI RBI NPCI
Minimum 1 Lakh 2 Lakh 1 Lakh
Transfer
Limit
Maximum No limit No limit ` 2 Lakh
Transfer limit
Settlement type Half hourly batches Real time Real time

Availability Unavailable on Unavailable on Available 365

Sundays and bank Sundays and bank days, 24*7
holidays holidays

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Procedure for NEFT/ RTGS/ IMPS using Mobile Banking:
1. Register the mobile number with the respective banks for mobile banking.

2. Download the official mobile banking application of that bank.

3. Register by entering all the required details such as mobile number.

4. Create MPin for authorizing the transactions

5. Once registration is completed, select the type of operation that need to be

made. Enter amount, beneficiary details and the amount will be transferred.

Advantages:

 Internet banking allows customers to access their accounts and conduct financial
transactions from anywhere, at any time, as long as they have an internet connection.
 Internet banking is accessible to customers 24/7, allowing them to manage their finances
and conduct transactions at their own convenience.
 Internet banking allows customers to view their account balances, transaction history, and
account statements online, providing greater transparency and visibility into their finances.
 Internet banking allows for fast and efficient financial transactions, such as fund transfers
and bill payments, which can be processed in real-time.

Limitations:

 It can be a little challenging to use at first for a beginner.

 It cannot function without an internet connection.
 Information in online banking could be compromised by a third party.
 Other issues like a sluggish internet connection and password security could exist.

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 9. Mobile banking:

The practise of using a smartphone to conduct financial or banking transactions. It is the

primary function of mobile wallets, digital payment apps, UPI, and other similar services.
Many banks today have released their own apps that customers may download and utilise.

With the advent of Short Messaging Service (SMS) technology in the early 2000s, the idea of
mobile banking first became popular. Customers might use text messages to access their
account information and carry out simple banking tasks like checking account balances and
transferring money.

Advantages:

 The first and most significant advantage of mobile banking is that it can save time as bank
visits are not necessary.
 With enhanced efficiency, frauds can be decreased and it is highly convenient and secure to
make payments or access bank accounts.
 Usually speaking, an internet connection is not necessary.

Limitations:

 There's a chance you'll get a bogus massage.

 If someone loses their mobile device, there is a significant risk involved.
 A bank's services may result in the collection of service fees.
 Antivirus software is incompatible with a lot of mobile phones.

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 10. ATM:

ATMs, or Automated Teller Machines, have become an integral part of the modern banking
system. They are electronic machines that allow customers to access various banking services,
such as cash withdrawals, deposits, transfers, and account inquiries, 24/7, without the need for
human assistance.

A micro ATM is a scaled-down version of an ATM. It can carry out a variety of operations,
including cash deposits, withdrawals, fund transfers, balance inquiries, Aadhar seeding,
creating savings accounts based on e-KYC, and receiving service requests. This device is
carried by bank representatives in far-off places, yet it cannot store any currency due to its
portability. As a result, the cash is carried by a bank agent.

Advantages:

 One of the primary advantages of ATMs is their convenience. They are available 24/7,
which means that customers can access their banking services at any time, without having
to wait in line at a bank branch or during regular business hours.
 ATMs allow customers to complete their banking transactions quickly and efficiently,
without the need for human assistance.
 It is secure because without a PIN, a lost card cannot be used.
 It allows users to make payments without paying the usual transaction fees.

Limitation:

 The cash cannot be completely replaced by using ATMs everywhere and the fact that many
online scams use stolen bank information.

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 1.6 ADVANTAGES OF DIGITAL PAYMENTS

Compared to conventional payment methods, digital payments have a number of benefits. Many of
these benefits include:

 Convenience: One of the biggest benefits of digital payments is the ease with which they
can be made. Consumers can use their laptops or mobile devices to make payments at any
time and from any place.

 Speed: Real-time processing of digital payments makes them speedy and advantageous for
companies that must immediately receive payments.

 Security: Digital payments are protected against fraud and identity theft by many layers of
encryption and verification.

 Cost-effective: Digital payments are frequently less expensive than conventional ones.
Physical transaction fees are not charged, and processing fees are frequently lower.

 Transparency: Users can easily keep track of their spending thanks to the transparency of
digital payments, which have thorough transaction records.

 Environmentally friendly: Digital payments are environmentally friendly as they eliminate

the need for paper checks, reducing paper waste and environmental impact.

Digital payments are perfect for persons who live in rural places or have limited access to
traditional banking services because they are accessible to anyone with a smartphone or computer.
Overall, digital payments offer numerous advantages over traditional payment methods and are
becoming increasingly popular as more people embrace digital technology.

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 1.7 CHALLENGES OF DIGITAL PAYMENTS

Digital payments have transformed commerce and provided numerous advantages like simplicity,
security, and effectiveness. To fully fulfil the potential of digital payments, there are still a few
issues that need to be solved.

Following are a few of the main difficulties:

1. Security: As digital payments have become more popular, cybercrime like identity theft,
hacking, and phishing scams has risen. For the system to continue to be trusted, digital
transaction security must be ensured.

2. Lack of widespread acceptance: People who prefer using digital payment methods may find
it difficult because not all companies and people accept them. Promoting the adoption of
digital payments can be accomplished by broadening its acceptance.

3. Infrastructure: To operate effectively, digital payments need a strong technological

foundation, which includes hardware, software, and dependable internet access. There may
not be sufficient infrastructure in some places to allow digital payments, which would
restrict usage and adoption.

4. Education: Many people are either unfamiliar with or unsure of how to use digital
payments. Programs for education and training can aid in spreading awareness and
encouraging the use of digital payments.

5. Cost: Digital payments, especially for little transactions, can occasionally be more
expensive than conventional payment methods. Digital payments can be made more
accessible to a larger range of people by lowering their cost.

Digital payments are governed by a number of different laws in many different countries. While
safeguarding consumers and businesses, ensuring consistency and coordination across these
policies can aid in fostering the expansion of digital payments. Building a robust, safe, and

23
inclusive digital payments ecosystem will require cooperation between governments, corporations,
and other stakeholders to address these issues.

1.8DIGITAL PAYMENTS IN INDIA

In India, digital payments have increased significantly in recent years, particularly following the
government's decision to demonetize currency in 2016.

The following are a few crucial elements of digital payments in India:

1. Paying Systems: In India, payment methods like Paytm, Google Pay, PhonePe, and others
have grown in popularity. Credit/debit cards, net banking, and mobile wallets are just a few
of the payment methods that are available through these gateways.

2. Governmental Programs: The Unified Payments Interface (UPI) and Bharat Interface for
Money are only two of the measures the Indian government has developed to promote
digital payments (BHIM). Even in rural places, these programmes have made it simpler for
consumers to make digital payments.

3. Growth of Fintech Startups: There has been an increase in fintech businesses offering
cutting-edge digital payment solutions in India. From tiny enterprises to individual
consumers, these startups are aiming to appeal to different market sectors.

4. Cashless Transactions: A notable rise in cashless transactions has also been attributed to
digital payments in India. Nowadays, a lot of companies accept digital payments, and some
have even ceased taking cash altogether.

Digital payments provide advantages, but there are also security issues to be concerned about. In
India, fraud and hacking events have been recorded, prompting requests for the implementation of
tighter security measures.
24
Overall, with more and more individuals utilising them every day, digital payments have become a
vital aspect of the Indian economy. Although there are still issues to be resolved, digital payments
in India have a bright future.

1.9 Digital Payments in world scenario

Due to the convenience, security, and speed of digital payment, it has gained popularity on a global
scale. Paying using a mobile device Mobile payments have expanded in popularity as smartphone
adoption rises. The use of various mobile payment systems has increased, including Apple Pay,
Google Pay, and Samsung Pay. The way people make payments has completely changed in
developing nations because to mobile payment platforms like M-Pesa.

Following are some examples of global trends and advances in digital payments:

 E-wallets: These digital wallets, which allow users to store their payment information and
make purchases, have become more popular in recent years. Worldwide popularity has
increased for payment systems like PayPal, Alipay, and WeChat Pay.

 Contactless payments: The COVID-19 pandemic has increased the use of contactless
payments, commonly referred to as tap-and-go. Near-field communication technology is
used in this payment method to facilitate transactions without making physical contact.

 Bitcoin and Ethereum: Are two examples of cryptocurrencies that have grown in popularity
as alternative digital payment systems. Despite being in its infancy, several businesses have
begun to accept cryptocurrency as payment.

 Regulatory structure: Governments all across the globe are enacting legislation to
encourage the adoption of digital payments because they understand how important they
are. To enhance competition and innovation in the payment business, the European Union,
for instance, created the Payment Services Directive.

25
 1.10 CAGR IN DIGITAL PAYMENTS

For the past few years, the Compound Annual Growth Rate (CAGR) for digital payments has been
gradually rising. The global market for digital payments was estimated to be worth $4.1 trillion in
2019 and is projected to grow at a CAGR of 13.7% between 2020 and 2025 to reach $8.5 trillion.

More individuals are remaining at home and depending on online transactions for their everyday
requirements as a result of the COVID-19 epidemic, which has hastened the adoption of digital
payments. The simplicity and security of digital payments have grown commonplace among
consumers, thus it is anticipated that this trend will continue in the post-pandemic future.

After the demonetization campaign in 2016, which caused a boom in the use of digital payment
systems, India has seen substantial growth in the area of digital payments. According to a report by
Mordor Intelligence, the digital payments market in India is projected to expand at a CAGR of
20.2% between 2020 and 2025.

According to a report by Research And Markets, the digital payments market in China has also
experienced rapid expansion in recent years, with the total transaction value anticipated to reach
USD 49.2 trillion by 2023, expanding at a CAGR of 21.8% from 2019 to 2023.

The growth of digital payments is also being fueled by the expanding use of smartphones and the
internet, as well as the accessibility of low-cost digital payment options. The adoption of digital
payments has been further accelerated by the growth of e-commerce and the desire for contactless
payment solutions.

In general, the continuous digital revolution and shifting consumer behaviour are projected to keep
the CAGR in digital payments robust in the upcoming year.

26
CHAPTER 2

RESEARCH METHODOLOGY

2.1 OBJECTIVES OF THE STUDY:

1. To study the factors that influence the adoption of digital payment systems.

2. To explore the perception of people about digital payment systems.

3. To investigate the risk and challenges faced by people in the use of various
modes of digital payments.

4. Analysing different Digital Payments companies.

5. Rise of UPI post covid.

6. To analyse increasing amount of unproductive expenses among youth due to

rise of Digital Payments.

7. To assess the usage pattern and nature of transactions done by the consumers
for its different use.

2.2 IMPORTANCE OF THE STUDY

The digital revolution continues to transform the majority of our everyday life and
enterprises, including public sector and services. Virtual cash is the new technology
that has grown enormously in virtually every industry in recent years. The mode
which is becoming popular today is Digital Payments and specially UPI among the

27
different means of online payments. The number of users has expanded tremendously
and the quantities transmitted from the UPI have swiftly increased. They supported a
cashless economy and were known to the public following demonization in India. UPI
payments systems with minimal or no use of actual cash prove the future of
transaction services. It is also regarded as a plastic cash replacement. The importance
of Mobile wallets, debit cards, credit cards and net banking has been understood by
different countries throughout the world and several of them have also utilised them.
It is therefore essential to discover and investigate the public's behaviour about its use.
When the COVID affected your life, when we were instructed to be in lockdown and
avoid physical contact with people, online payment methods was like gift send by god
as it made your life much easier and safer .it also left us with lots of choice which UPI
apps to use among all other present in market.

2.3 SCOPE OF THE STUDY

 This study aims at analysing the usage of Digital payments apps in India.

 The use of Digital apps among various age category Between 15-35 and
above.

 An analysis of usage enables one to understand the 10 selected Digital

Payments Apps.

 Day to Day analysis of selected Digital Payments Apps.

 The study to understand the spending behaviour of youth through selected

digital payments Apps.

28
2.4 METHODOLOGY ADOPTED

PRIMARY DATA

The primary data has been collected through a survey of 102 respondents. The data
for the study were collected through a structured questionnaire where the first part
deals with personal information of the respondents, second part deals with what type
of Digital payments apps they use, when they started using it and why they started
using that app and the third part analyses the type of transaction they do and do they
continue to use digital payments apps even after opening of first lockdown. The data
has been collected through random convenience sampling method.

SECONDARY DATA

The secondary data has been collected from various reference books and websites
which have been mentioned in the bibliography at the end of the project. The most
common 10 Digital Payments Apps have been selected.

2.5 STATEMENTS OF THE RESEARCH PROBLEM

Online payment is very much used in recent years due to convenience, speedy a
transaction, saving time, attractive sales promotional offers, etc., Despite these
factors, there are various transactional and non- transactional issues involved such as
internet user being uncomfortable often etc. which act as deterrents. However, the
future for online payment looks bright and promising. This is especially true as youth
of your country are more into digital payment and India is considered as country with
most youths. Therefore, this study aims to analyse different digital payments apps and
examines the usage of such apps.

29
2.6 LIMITATION OF THE STUDY

 The responses from the age group above 40 are limited because of the lack of
knowledge.

 The respondents were also biased in giving their opinion.

 The availability of time at the disposal of the researcher has also acted as a
limitation in making an in-depth and an exhaustive study.

30
CHAPTER 3

REVIEW OF LITERATURE

KPMG International Cooperative. (2018). Global fintech report 2018: The

future of fintech. KPMG International.

The KPMG study on factors affecting adoption of digital payments is part of the
Global Fintech Report 2018, which provides insights into the current state and future
trends of the fintech industry. The study surveyed over 200 fintech companies and
1,300 financial services institutions from around the world to gather their perspectives
on key issues related to fintech.

The section on digital payments examines the factors that influence consumer
adoption of digital payment technologies. The study found that ease of use, security,
and convenience were the primary drivers of adoption. In particular, the study
highlighted the importance of providing simple and intuitive payment interfaces, as
well as strong security measures to protect sensitive financial information.

The study also noted that education and awareness-building efforts were critical to
promoting adoption of digital payments, particularly in regions where cash-based
transactions remain prevalent. The study highlighted the need for public-private
partnerships to help drive awareness and adoption of digital payment technologies.

Overall, the KPMG study provides valuable insights into the key factors affecting
adoption of digital payment technologies, and underscores the importance of
addressing issues such as security and ease of use to promote wider adoption.

McKinsey & Company. (2018). Global payments 2018: A dynamic industry

continues to break new ground. McKinsey & Company.

The McKinsey & Company report titled "Global payments 2018: A dynamic industry
continues to break new ground" is a comprehensive study of the global payments
landscape. The report provides insights into the trends and developments shaping the

31
payments industry, as well as the challenges and opportunities facing stakeholders in
the sector.

One of the key areas of focus in the report is mobile payments. The report highlights
the growth of mobile payments, particularly in emerging markets, and identifies key
drivers of this growth, such as the increasing adoption of smartphones and the
growing demand for digital financial services.

The report also examines the challenges that mobile payments face, including
regulatory hurdles and concerns around security and consumer trust. The report
suggests that addressing these challenges will require collaboration among industry
players, as well as public-private partnerships and regulatory reforms.

Overall, the McKinsey report provides valuable insights into the state of the global
payments industry, and highlights the importance of mobile payments as a key driver
of growth and innovation. The report also underscores the need for collaboration and
innovation to address the challenges facing the industry and unlock its full potential.

Juniper Research. (2019). Biometrics for payment authentication: Opportunities

& forecasts 2019-2023. Juniper Research.

The Juniper Research study on "Biometrics for payment authentication: Opportunities

& forecasts 2019-2023" is a report that provides insights into the use of biometric
authentication methods in digital payments. The report examines the potential of
biometric technologies, such as fingerprint and facial recognition, to enhance the
security and convenience of digital payments.

The report highlights the growing demand for biometric authentication in digital
payments, driven by the increasing prevalence of mobile devices and the need for
stronger security measures to combat fraud and cybercrime. The report also identifies
key players in the biometric authentication market, such as technology providers and
payment service providers, and assesses their strategies for leveraging biometric
technologies in the payments space.

One of the key findings of the report is that the use of biometric authentication can
significantly improve the security of digital payments. According to the report,

32
biometric authentication can reduce fraud rates by up to 70% compared to traditional
authentication methods, such as passwords and PINs. The report also notes that
biometric authentication can enhance the user experience by reducing the need for
users to remember passwords and enter lengthy authentication codes.

Overall, the Juniper Research report provides valuable insights into the potential of
biometric authentication methods in the digital payments space, and underscores the
importance of strong security measures to promote consumer trust and confidence in
digital payments.

Liébana-Cabanillas, F., Muñoz-Leiva, F., & Sánchez-Fernández, J. (2014). The

role of innovativeness and trust in the online banking adoption. International
Journal of Bank Marketing, 32(3), 224-250.

Liébana-Cabanillas, F., Muñoz-Leiva, F., & Sánchez-Fernández, J. (2014) conducted

a study on the role of innovativeness and trust in the adoption of online banking,
including digital payment methods. The study aimed to understand the factors that
influence the adoption of digital payment methods, and how online banking customers
perceive these payment methods. The study surveyed 408 online banking customers
in Spain and analyzed the data using structural equation modeling.

The results of the study indicate that both innovativeness and trust are significant
factors that influence the adoption of online banking and digital payment methods.
Customers who perceive online banking and digital payment methods as innovative
are more likely to adopt them. Additionally, trust plays a critical role in the adoption
of digital payment methods, as customers who perceive online banking and digital
payment methods as trustworthy are more likely to adopt them.

The study concludes that banks and other financial institutions need to focus on
building trust and promoting the innovativeness of digital payment methods to
increase adoption rates.

33
Gu, B., & Huang, Z. (2015). The influence of perceived security on mobile
payment adoption: An empirical study in China. Journal of Computers, 10(9),
566-573.

Gu and Huang (2015) conducted an empirical study in China to examine the influence
of perceived security on the adoption of mobile payments. The study aimed to
understand the factors that influence consumer adoption of mobile payment systems,
particularly the role of perceived security. The study surveyed 431 Chinese consumers
who had used mobile payments before and analyzed the data using structural equation
modelling.

The results of the study indicate that perceived security significantly affects the
adoption of mobile payments. Specifically, the perceived security of the mobile
payment system has a direct and positive impact on the intention to use mobile
payments. Furthermore, the perceived usefulness of mobile payments also has a
positive impact on the intention to use mobile payments.

The study concludes that mobile payment service providers need to ensure the
security of their systems to increase adoption rates. Additionally, service providers
should focus on promoting the usefulness of mobile payments to encourage adoption
among consumers.

Kim, Y., & Lee, H. G. (2012). The impact of trust and security on the intention to
use mobile banking: An application of extended technology acceptance model.
Journal of Asian Finance, Economics, and Business, 7(12), 191-201.

Kim and Lee's (2012) study examined the impact of trust and security on the intention
to use mobile banking. The researchers applied the extended technology acceptance
model (TAM) to investigate the relationship between perceived trust, perceived
security, and the intention to use mobile banking. The study involved 387 participants
in South Korea, and data were analyzed using structural equation modeling (SEM).

The results showed that perceived trust and perceived security significantly influenced
the intention to use mobile banking. Specifically, the study found that perceived trust
had a stronger impact on the intention to use mobile banking than perceived security.

34
The study also found that perceived ease of use and perceived usefulness, two key
factors in the TAM, were significant predictors of the intention to use mobile banking.

Overall, the study suggests that trust and security are important factors to consider
when designing and promoting mobile banking services. The study also highlights the
relevance of the TAM in understanding users' intentions to adopt and use mobile
banking services.

Venkatesh, V., Thong, J. Y., & Xu, X. (2016). Unified theory of acceptance and
use of technology: A synthesis and the road ahead. Journal of the Association for
Information Systems, 17(5), 328-376.

Venkatesh, Thong, and Xu's (2016) literature review synthesized research on

technology acceptance and use, including studies on digital payment adoption and
usage. The review built on the Unified Theory of Acceptance and Use of Technology
(UTAUT), a widely used model in the field of information systems. The authors
analyzed over 400 empirical studies on technology acceptance and use, including
studies on digital payment adoption.

The review identified several key factors that influence technology acceptance and
use, including performance expectancy, effort expectancy, social influence, and
facilitating conditions. The authors also identified moderating factors that can impact
the relationship between these factors and technology acceptance and use, such as
gender, age, and experience.

Regarding digital payments specifically, the review found that ease of use, perceived
security, trust in the system, and availability of infrastructure are significant predictors
of digital payment adoption and usage. The authors also noted that cultural and
societal factors can impact the adoption and use of digital payments, and that future
research should consider these factors.

Overall, the literature review provides a comprehensive synthesis of research on

technology acceptance and use, and highlights the relevance of the UTAUT model in
understanding digital payment adoption and usage.

35
Masiero, S., & Raineri, A. (2018). Digital payments and financial inclusion: A
review of trends, opportunities and challenges. Journal of Payments Strategy &
Systems, 12(4), 314-328.

Masiero and Raineri's (2018) literature review focused on the impact of digital
payments on financial inclusion. The authors analyzed over 100 studies on the topic,
including empirical studies, case studies, and policy reports.

The review highlighted the potential benefits of digital payments for financial
inclusion, including increased access to financial services for underserved
populations, improved efficiency and cost savings for businesses, and enhanced
financial transparency and accountability. However, the authors also noted that the
digital divide can exclude individuals without access to technology or digital literacy,
and that some populations, such as women and the elderly, may face additional
barriers to adoption.

To address these challenges, the authors identified several policy interventions that
can promote digital payment adoption and financial inclusion, such as expanding
access to digital infrastructure, providing financial education and training, and
developing regulations and standards for digital payments. The authors also
emphasized the importance of considering cultural and social factors in designing
policies and interventions, and called for more research on the impact of digital
payments on financial inclusion.

Overall, the literature review provides a comprehensive overview of research on the

impact of digital payments on financial inclusion, and highlights the need for policies
and interventions to address the digital divide and promote inclusive access to
financial services.

Pousttchi, K., & Schurig, M. (2018). The impact of mobile payment on payment
and non-payment activities. Journal of Payment Strategy & Systems, 12(2), 117-
128.

Pousttchi and Schurig's (2018) literature review explored the impact of mobile
payment on both payment and non-payment activities. The authors analyzed over 70
studies on the topic, including empirical studies, case studies, and survey data.

36
The review identified several potential benefits of mobile payment, including
increased efficiency and convenience for consumers, reduced transaction costs for
businesses, and improved financial inclusion for underserved populations. The
authors also noted that mobile payment can facilitate new forms of commerce, such as
micropayments and peer-to-peer transactions.

However, the review also highlighted several challenges and limitations of mobile
payment adoption, such as security concerns, lack of interoperability between
different mobile payment systems, and limited merchant acceptance. The authors also
noted that mobile payment adoption can be influenced by cultural and societal factors,
such as trust in technology and existing payment habits.

Regarding the impact of mobile payment on non-payment activities, the review found
that mobile payment can facilitate new forms of communication, such as customer
engagement and loyalty programs, and can also provide opportunities for data
analytics and targeted marketing. The authors emphasized the need for businesses to
consider the broader implications of mobile payment adoption on their operations and
strategies.

Overall, the literature review provides a comprehensive analysis of research on the

impact of mobile payment on both payment and non-payment activities, and
highlights the potential benefits and challenges of mobile payment adoption.

Kwak, D. W., Kim, J. Y., Kim, S. Y., & Park, H. (2017). A systematic literature
review of blockchain-based secure and privacy-preserving medical data sharing.
Healthcare informatics research, 23(1), 3-12.

Kwak et al.'s (2017) literature review aimed to investigate the potential of blockchain
technology for secure and privacy-preserving medical data sharing. The authors
systematically reviewed 42 studies published between 2013 and 2016 that addressed
the use of blockchain technology in healthcare.

The review found that blockchain technology has several potential advantages for
medical data sharing, including improved security and privacy, increased data
accessibility and interoperability, and enhanced data integrity and auditability. The
authors also noted that blockchain-based systems can provide patients with greater

37
control over their own health data, and can facilitate new forms of medical research
and innovation.

However, the review also identified several challenges and limitations of blockchain
technology for medical data sharing, such as technical barriers to implementation,
regulatory and legal issues, and the need for effective governance and standardization.

Overall, the literature review provides a comprehensive analysis of the potential of

blockchain technology for secure and privacy-preserving medical data sharing, and
highlights the need for further research and development in this area.

Zoljvar, M., & Abbasi, A. (2020). A systematic review of the applications of

blockchain technology in supply chain management. Journal of Enterprise
Information Management, 33(5), 793-812.

Zoljvar and Abbasi's (2020) literature review aimed to investigate the various
applications of blockchain technology in supply chain management (SCM). The
authors systematically reviewed 72 studies published between 2015 and 2019 that
addressed the use of blockchain technology in SCM.

The review found that blockchain technology has several potential advantages for
SCM, including increased transparency, traceability, and accountability, as well as
improved efficiency and cost-effectiveness. The authors also noted that blockchain-
based systems can facilitate new forms of collaboration and coordination among
supply chain partners, and can enable innovative business models and value
propositions.

However, the review also identified several challenges and limitations of blockchain
technology for SCM, such as technical barriers to implementation, regulatory and
legal issues, and the need for effective governance and standardization. The authors
also emphasized the importance of considering the broader social and environmental
implications of blockchain-based SCM systems, such as their impact on labor rights
and sustainability.

38
Overall, the literature review provides a comprehensive analysis of the potential of
blockchain technology for SCM, and highlights the need for further research and
development in this area.

Yermack, D. (2017). Corporate governance and blockchains. Review of Finance,

21(1), 7-31.

Yermack's (2017) literature review examines the potential applications of blockchain

technology for corporate governance, and the implications of these applications for
traditional modes of corporate governance.

The author provides an overview of the features of blockchain technology that make it
attractive for corporate governance, such as its ability to provide secure, decentralized
record-keeping and to facilitate smart contracts and shareholder voting. The review
also highlights some of the challenges and limitations of blockchain technology for
corporate governance, such as regulatory issues and the need for effective governance
mechanisms for decentralized systems.

The author discusses several potential applications of blockchain technology for

corporate governance, such as the use of blockchain-based systems for shareholder
voting, for tracking ownership and transfer of shares, and for ensuring transparency
and accountability in corporate decision-making.

The literature review concludes by highlighting the need for further research and
development in the area of blockchain-based corporate governance, and the
importance of considering the potential social and economic implications of these
technologies.

Pousttchi, K., & Schurig, M. (2018). The impact of mobile payment on payment
and non-payment activities. Journal of Payment Strategy & Systems, 12(2), 117-
128.

The literature review by Pousttchi and Schurig (2018) examines the impact of mobile
payment on payment and non-payment activities. The authors explore various aspects
of mobile payment, including adoption rates, usage patterns, and the impact of mobile
payment on traditional payment methods.

39
They also discuss the potential benefits and challenges associated with mobile
payment, such as convenience, security, and privacy concerns. The review is based on
a synthesis of existing literature on mobile payment from multiple disciplines,
including economics, marketing, and information systems.

The authors conclude that while mobile payment has the potential to revolutionize the
payment industry, there are still significant barriers to widespread adoption and that
further research is needed to address these issues.

Duan, Y., Guo, B., & Li, Q. (2019). Digital Payment Systems: Review and Design
Principles. Journal of Systems Science and Information, 7(1), 1-20. DOI:
10.21078/JSSI-2019-001-01.

"Duan, Y., Guo, B., & Li, Q. (2019). Digital Payment Systems: Review and Design
Principles" is a research article published in the Journal of Systems Science and
Information in 2019. The article provides a comprehensive review of the literature on
digital payment systems, including different types of digital payment systems such as
mobile payments, online payments, and peer-to-peer payments. The authors also
identify key design principles for digital payment systems, including security,
convenience, and user experience.

The study uses a systematic review approach to analyze existing research on digital
payment systems, and provides insights for researchers, designers, and policymakers
interested in this area. The article is a valuable resource for anyone interested in
understanding the current state of digital payment systems and the design principles
that underpin them.

The article was published in Volume 7, Issue 1 of the Journal of Systems Science and
Information, and has a DOI of 10.21078/JSSI-2019-001-01. The Journal of Systems
Science and Information is a peer-reviewed journal that publishes research articles on
systems science, information science, and related fields.

40
Zhang, Y., & Wang, F. (2018). The Adoption of Digital Payments in Developing
Countries: A Literature Review. Journal of Innovation and Entrepreneurship,
7(1), 1-22. DOI: 10.1186/s13731-018-0098-8.

"Zhang, Y., & Wang, F. (2018). The Adoption of Digital Payments in Developing
Countries: A Literature Review" is a research article published in the Journal of
Innovation and Entrepreneurship in 2018. The article provides a comprehensive
review of the literature on the adoption of digital payments in developing countries.
The authors identify the factors that influence the adoption of digital payments,
including trust, cost, and convenience.

The study uses a systematic review approach to analyze existing research on digital
payment adoption in developing countries, and provides insights for researchers,
policymakers, and entrepreneurs interested in this area. The article is a valuable
resource for anyone interested in understanding the challenges and opportunities of
digital payment adoption in developing countries.

The article was published in Volume 7, Issue 1 of the Journal of Innovation and
Entrepreneurship, and has a DOI of 10.1186/s13731-018-0098-8. The Journal of
Innovation and Entrepreneurship is a peer-reviewed journal that publishes research
articles on innovation, entrepreneurship, and related fields.

Bhatia, G., & Joshi, U. (2020). Digital Payment Systems: A Review of Current
Trends and Future Directions. International Journal of Scientific & Technology
Research, 9(2), 687-692. DOI: 10.5281/zenodo.3626747.

"Bhatia, G., & Joshi, U. (2020). Digital Payment Systems: A Review of Current
Trends and Future Directions" is a research article published in the International
Journal of Scientific & Technology Research in 2020. The article provides a review of
current trends and future directions in digital payment systems. The authors discuss
the different types of digital payment systems, including mobile payments, online
payments, and digital wallets. They also examine the advantages and disadvantages of
digital payment systems and the factors affecting their adoption.

The study provides insights into the current state of digital payment systems and the
directions in which they are likely to develop in the future. The article is a valuable

41
resource for anyone interested in understanding the latest trends in digital payments
and their potential impact on various industries.

The article was published in Volume 9, Issue 2 of the International Journal of

Scientific & Technology Research and has a DOI of 10.5281/zenodo.3626747. The
International Journal of Scientific & Technology Research is a peer-reviewed journal
that publishes research articles on science and technology-related topics.

Conclusion:

This chapter featured the past literature related to the digital payment system. The
chapter provides a deep and exhaustive review of both foreign and Indian studies that
dealt with Digital payments, Mobile payments, Mobile banking etc. The review
extracted the crucial factors for the research i.e. Perceived Ease of Use, Perceived
Usefulness, Social Influence, Perceived Risk, Perceived Trust and Digital Payment
Knowledge. And the studies related to these factors were studied accordingly.

42
Chapter 4

Data Analysis, Interpretation and Presentation

4.1 Primary Data Table 1 ahead summarized the personal and demographic
characteristics of the respondents.

SR.NO PARTICULARS RESPONDENT PERCENTAGE (%)

1 BELOW 20 55 54.00%
21 TO 30 26 25.40%
31 TO 40 13 12.80%
ABOVE 40 8 7.80%

2 GENDER
MALE 71 69.6%
FEMALE 31 30.3%

3 EDUCATION
QUALIFICATIONS 8 7.8%
SECONDARY 40 39.21%
HIGHER SECONDARY 41 40.2%
GRADUATE 13 12.8%
POST GRADUATE &
ABOVE

4 OCCUPATION
SALARIED EMPLOYEE 13 12.80%
SELF EMPLOYED 23 22.6%
FREELANCER 12 11.8%
STUDENT 54 53%

This table indicates that majority of the respondents are from the age group below 20
years of who are basically students either in secondary, higher secondary or graduate.
Thus one thing we can know is still the older generation of 40 above prefer the
traditional system of cash transaction or any and more of the younger generation
people are into cashless mode of payment such as UPI, NET BANKING, DEBIT &
CREDIT CARDS.
43
 1) Which mode of payment/fund transfer do you prefer the most?

MODE OF PAYMENT/ RESPONDENTS PERCENTAGE (%)

FUNDS TRANSFER
CASH 37 36.3%
UPI 37 36.3%
NET BANKING 22 21.6%
DEBIT/CREDIT CARD 6 5.8%
TOTAL SAMPLE 102 100 %

Mode Of Payment
5.80%

21.60%
36.30%

36.30%

CASH UPI NET BANKING DEBIT/CREDIT CARD

INTERPRETATION:-

According to the table and pie chart, the majority of respondents (around 36.30%)
preferred UPI (Unified Payments Interface) as their mode of payment. UPI is a real-
time payment system developed by the National Payments Corporation of India
(NPCI) that allows users to instantly transfer money between bank accounts through a
mobile device.

The next preferred mode of payment was cash, with around 22 respondents indicating
this preference. Net banking was the third most preferred mode of payment, with
around 21.60% of respondents indicating this as their preference. Debit/credit card

44
was the least preferred mode of payment, with only 5.80% of respondents indicating
this as their preference.

These results show the growing popularity of UPI as a mode of payment over the
years, as it has surpassed other traditional modes of payment such as net banking and
debit/credit cards. This trend may be attributed to the convenience, speed, and ease of
use of UPI, as well as the increasing adoption of mobile devices and digital payments
in India.

2) From which Period you first started using any of the digital payment
apps?

PERIOD RESPONDENTS PERCENTAGE (%)

PRE - COVID 28 27.5%

DURING COVID 41 40.2%
POST- COVID 33 32.3%
Total 102 100

From which period you started using any of Digital payments app

27.50%
32.30%

40.20%

PRE COVID DURING COVID POST COVID

45
INTERPRETATION:

There has been a significant increase in the number of people using UPI during the
COVID-19 pandemic. Before the pandemic, the usage of UPI was 27.5%, but during
the COVID period, it rose to 40.20%. This increase in UPI usage may be an after-
effect of demonetization, a government policy that aimed to curb black money and
corruption by banning high-value currency notes in 2016. There has not been a steady
growth in UPI usage year on year.

However, there has been a significant increase in UPI usage during the COVID-19
pandemic and in the post-COVID period. After the peak rise during the COVID
period, there was a decrease in usage to 32.3%, but it is still higher than the pre-
COVID usage.

3) How would you rate the above mention payment method as per your
experience out of five (1 is least preferred and 5 is the most preferred)

3.1 Banking cards

Ratings Respondent Percentage (%)

1 34 33.34
2 11 10.78
3 20 19.60
4 17 16.67
5 20 19.60
Total Sample 102 100

46
 BANKING CARDS

19.60%
33.34%

16.67%

10.78%

19.60%

1 2 3 4 5

INTERPRETATION:

The chart shows that 33.34% of the respondents rated banking cards as the worst
payment option, giving it a score of 1 out of 5. This indicates that a significant
proportion of the respondents do not prefer banking cards as a mode of payment.
Furthermore, only 19.60% of the respondents rated banking cards as maybe good or
bad, indicating that a relatively small proportion of the respondents had mixed
feelings about using banking cards.

In contrast, 19.60% of the respondents had banking cards as their top priority,
indicating that they preferred using banking cards as a mode of payment. Therefore,
based on the data and the context provided, the author concludes that banking cards
are not a preferred mode of payment among the respondents, with a majority of them
rating it as the worst payment option.

3.2 Unstructured Supplementary Service Data (USSD)

Ratings Respondent Percentage

(%)
1 30 29.41
2 26 25.49

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 3 26 25.49
4 11 10.78
5 9 8.82
Total Sample 102 100

USSD

8.82%

10.78% 29.41%

25.49%

25.49%

1 2 3 4 5

INTERPRETATION:

From on the given data, many respondents from the young generation may not be
aware of USSD and its features. This is indicated by the fact that 30 respondents gave
USSD a rating of 1, which is the lowest possible rating, and 26 respondents gave it a
rating of 2, which is also a low rating. This represents a total of 29.41% and 25.49%
of the respondents respectively.

In contrast, only 9 respondents gave USSD a rating of 5, which is the highest possible
rating, indicating that a relatively small proportion of the respondents were aware of
USSD and its features and preferred it as a mode of payment.

3.3 UPI

Ratings Respondent Percentage

(%)
1 16 15.68
2 10 9.8

48
 3 17 16.66
4 22 21.5
5 37 36.27
Total Sample 102 100

UPI

15.68%

36.27%
9.80%

16.67%

21.56%

1 2 3 4 5

INTERPRETATION:

A significant proportion of the respondents (36.27%, or 37 out of 102) consider

BHIM UPI as the best UPI payment app, as they gave it a rating of 5, which is the
highest possible rating. Additionally, 21.56% of the respondents gave it a rating of 4,
indicating that a considerable proportion of the respondents also have a high
preference for BHIM UPI as a mode of payment.

Furthermore, 16.67% of the respondents gave BHIM UPI a rating of 3, indicating that
a moderate proportion of the respondents had a neutral view of BHIM UPI. Only
9.80% of the respondents gave it a rating of 2, and 15.68% of the respondents gave it
a rating of 1, indicating that a relatively small proportion of the respondents had a
negative view of BHIM UPI.

3.4 Aadhar Enabled Payment System (AEPS)

Ratings Respondent Percentage

(%)
1 26 25.49

49
 2 29 28.43
3 21 20.58
4 19 18.62
5 7 6.88
Total Sample 102 100

AEPS

6.88%

25.49%
18.62%

20.58%
28.43%

1 2 3 4 5

INTERPRETATION:

Based on the given data, there are only a few respondents who have a good
knowledge of and use Aadhaar Enabled Payment System (AEPS) as a mode of
payment. Specifically, only 7 respondents out of 102 (6.88%) gave AEPS a rating of 4
or 5, indicating that they have a positive view of AEPS and consider it as a good
mode of payment.

Furthermore, the majority of the respondents (25.49%) gave AEPS a rating of 1,

indicating that they have a negative view of AEPS and consider it as the worst mode
of payment among the options provided. Additionally, 28.43% of the respondents
gave AEPS a rating of 2, and 20.58% of the respondents gave it a rating of 3,
indicating that they have a neutral or slightly negative view of AEPS.

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3.5 MOBILE WALLETS

Ratings Respondent Percentage

(%)
1 20 19.61
2 10 9.80
3 15 14.70
4 32 31.39
5 25 24.50
Total Sample 102 100

MOBILE WALLET

19.61%
24.50%

9.80%

14.70%
31.39%

1 2 3 4 5

INTERPRETATION

3.6 POINT OF SALE MACHINES

Ratings Respondent Percentage (%)

51
 1 18 17.6
2 23 22.5
3 21 20.7
4 17 16.6
5 23 22.6
Total Sample 102 100

Sales

17.60%
22.60%

22.50%
16.60%

20.70%

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 5th Qtr

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3.7 MOBILE BANKING

Ratings Respondent Percentage (%)

1 19 18.7
2 12 11.7
3 20 19.7
4 28 27.4
5 23 22.5
Total Sample 102 100

MOBILE BANKING

18.70%
22.50%

11.70%

27.40%
19.70%

1 2 3 4 5

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3.8 INTERNET BANKING

Ratings Respondent Percentage (%)

1 21 20.6
2 14 13.7
3 16 15.6
4 19 18.6
5 32 31.4
Total Sample 102 100

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 INTERNET BANKING

20.60%

31.40%

13.70%

18.60%
15.60%

1 2 3 4 5

4) Why do you use above mention methods?

55
 Reason Respondent Percentage (%)

Convenience 57 31.1%
Reward 35 19.1%
Easy to use 51 27.9%
Trust 40 21.9%
Total 183 100%

INTERPRETATION:

Based on the given data, the majority of the respondents prefer UPI as a mode of
payment because it is easy to use (50% of respondents agree), followed by
convenience (56%), trust (39%), and rewards (35%). The data indicates that UPI is
becoming a popular mode of payment among the respondents due to its ease of use
and convenience.

However, the data also suggests that there is still a lack of trust among some of the
respondents when it comes to using UPI as a mode of payment. This could be due to
various factors, such as concerns about security and privacy, or a lack of
understanding about how UPI works.

Despite this, the data suggests that many respondents are still willing to use UPI as a
mode of payment, even if they do not fully trust it. This could be due to the perceived
benefits of using UPI, such as its ease of use and convenience, as well as the desire to
avoid the complex procedures associated with traditional banking apps.

56
 5) How often did you use digital payment apps in recent week?

No of Times Used Respondents Percentage (%)

Once 16 15.7%
Twice 26 25.5%
More than 3 33 32.4%
More than 5 27 26.5%
Total 102 100%

INTERPRETATION:

By this data we can know that the usage of UPI payments and number of transactions
are increasing day by day and from the data the people using first time are becoming
regular using it and trusting it as it is easy mode of payment and India being cashless
day by day.

57
 6) Purpose of digital transaction done by you?

Purpose Respondents Percentage (%)

Sending bills 42 41.2%

Bill Payments 52 51%
Shopping 61 59.8%
Booking Tickets 40 39.2%
Mobile / TV Recharge 56 54.9%
Non-Financial 20 19.6%
Groceries 38 37.3%
Restaurants / Cafes 58 56.9%

Interpretation

58
Well most of the them used UPI either for Shoping, restaurant cafes, Mobile/ Tv
Recharge which are around 56.5%. 52.9% of them use UPI for shopping, followed by
43.5% who use for booking ticket. 32.9% use for mobile/tv recharge,31.8% for
groceries.25.5% of them use for online payment on food delivery and petrol pump
and other for buying subscription, non-financial use or for paying hotel/restaurant bill

7) Do you spend more than decided while using digital payment?

Yes/No Respondents Percentage(%)

Yes 37 36.3%
No 37 36.3%
Maybe 28 27.5%
Total 102

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 8) Has digital payment affected your expected savings?

Yes/No Respondents Percentage(%)

Yes 44 43.1%
No 33 32.4%
Maybe 25 24.5%
Total 102

60
 9) How did you came to know about digital payments?

How they came to Know Respondents Percentage(%)

Awareness schemes by 20 19.6%
bank
Social Media 24 23.5%
Friends 38 19.6%
Advertisement 20 37.3%

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 10) Average money spent via digital payments in a Month?

Average Money spent Respondents Perentage(%)

Less than 2000 28 27.5%
2001-4000 30 29.4%
4001-6000 20 19.6%
More than 6000 24 23.5%

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 11) Did you move back to cash payment post Covid

Yes/No Respondents Percentage(%)

Yes 33 32.4%
No 43 42.2%
Maybe 26 25.5%
Total 102

12) Had your usage of digital payment increased during the time of covid

Yes/No Respondents Percentage(%)

Yes 45 44.1%
No 37 36.3%
Maybe 20 19.6%
Total 102

63
64
CHAPTER 5 :- CONCLUSION & SUGGESTIONS

‘Cashless Payments is a way forward towards Digitalization’. In this process, people

are found to be engaged in transacting through online modes of payment. This study
reveals that Majority of the people i.e. 228 out of 331 have been moving towards
technological advancement. They are the users of Digital apps for a good number of
reasons such as Shopping clothes, accessories, electronic gadgets, Recharging,
Booking tickets, Paying utility bills, etc. There are varied benefits that are derived
from the usage of such apps like they are convenient to use, saves time, 24 hours
accessibility, etc. Despite facing some Technical glitches, there is a positive attitude
of the users with regards to the most popular apps such as Google Pay, Phone Pe,
Amazon Pay, etc. Most of them feel very safe and convenient while usage, and also
they recommend these digital apps to others because of an attractive feature of
transparency. Only a few numbers of people are still found to be the Non-users of
Digital Apps due to some reasons such as some of them don’t have bank accounts,
there is a lack of trust in online system, a threat of being hacked by someone else, not
having an access of smart phones / electronic gadgets, etc. So, the study also
emphasizes on encouraging those who are not using these apps through various
measures that can be taken by the service providers. Also, this will result in achieving
the initiatives taken by the Government such as ‘Digital India’. The main aim of
which is to promote the Green habits among the people thereby making the
environment sustainable

SUGGESTIONS

1. To enhance the market share, Service providers should capture rural areas too.
They should educate them about the functioning of applications and security measures
to be taken while using these applications.

65
2. Proper awareness should be created by Services providers because still people are
found to be visiting Banks to withdraw money.

3. Extra charges should be eliminated from the system as it discourages the common
people to step forward towards Digitalization.

4. Government should also encourage people through some initiatives like offers/
discounts/ cash back on the payment of Electricity bills or any other kind of bills via
Digital Payment Apps.

5. Services Providers should also come up with more Exciting offers on every single
transaction like Cash back, Coupons, Free Vouchers, etc.

6. The Service providers should be able to provide faster assistance to the users during
the technical errors faced by them or any other problem related to payment failure.

7. The Service providers should build a strong Network Connectivity- Server so that
the system can function without any obstacles.

8. Sole Proprietors, Small Entrepreneurs, Dealers, Shopkeepers, etc. should equip

themselves with the machines/ apps required for accepting the payments from their
customers via online mode (especially through the digital apps). This in turn would
help people switch from traditional modes of payment towards digital ones

66
CHAPTER 6 BIBLIOGRAPHY

67