The Covid-19 pandemic has necessitated changes in the way people do shopping and banking, with most now easily carrying out transactions through payment applications, where, buying and selling is 24×7.
India has made a significant progress on retail payment systems with various solutions with National Financial Switching (NFS) such as UPI, RuPay, BHIM, NACH, IMPS, Fastag, BBPS, *99#, CTS & AePS. National Financial Switching (NFS) has established a strong and sustainable operational model with in-house capabilities whose services are on par with any global ATM network.
There are three types of Digital Payments (1) Card Networks (2) Closed Loop Stored Values (i.e., Wallets / Gift Cards) (3) RTP – Real Time Payment Systems (i.e., UPI). Unified Payment Interface usage across India, by platform is PhonePe is at 42.5 percent Google Pay at 36 percent, Paytm at 14.9 percent, Amazon is at 2 percent and rest at 4.6 percent.
Digital payments in western countries largely focus on a person sending money to a merchant. UPI does that, but it also enables peer-to-peer payments and across a wide-range of apps which is again interoperable.
How do Payment Apps make money?
* UPI based transactions – Payment apps do not earn from UPI transactions. They offer this transaction even though it is free to have a customer base, such that additional paid services could be offered
* Bill Payments – When customer pays any kind of bills from their payment app such as electricity, DTH recharge, water, insurance, loan repayment, postpaid bill and so on, the payment app takes a commission from those companies.
* Mobile recharges – Whenever a customer recharges on any SIM operators from their payment app, they get commission by that operator on every recharge that is made.
* Wallet money – Whatever the money is stored in the customers wallet, they get an interest until such time, it is kept with them.
* Shopping – Many payment applications have built in shopping applications, through which they sell and make money.
Advantages of Digital Payments:
* Secure & Safe Payment: Payments made through payments are robust. Unified Payments Interface (UPI) offers an architecture and a set of standard Application Programming Interface (API) specifications to facilitate online payments
* Instant Settlements: Instant ‘Pay’ (push) and ‘Collect’ (pull) using single click two factor authentication where mobile is first factor and MPIN/Biometrics as second factor.
* No privacy breach: They have Virtual Payment Addresses (VPA), thus eliminating the need to provide sensitive account information to merchants/individuals.
* No service charges: Unlike service charge (Tax) payable for services like IMPS or NEFT in any banks, you don’t need to pay service charge (Tax) for a UPI payment as the service is completely offered free by the Indian government.
* Offers: Cash back, discounts, loyalty/rewards points and free recharges offered by merchants and payment apps.
Disadvantages of digital payments:
* Getting hacked: Payments made through payment apps are robust, but susceptible to social engineering frauds, some of the most common frauds we see are customer care frauds, KYC frauds and QR code scan frauds.
* Delay for stuck settlements: Digital payments are very fast and safe medium, but sometimes your transaction may get struck because of your bank server down or a weak internet network. In such cases, the payment is settled in 48 hours.
* Low number PIN: – PIN Numbers are very small digit i.e., 4 or 6 digits, it is not safe, so make your payment very carefully by adding fingerprint security option to the application.
* One time transfer limit: Maximum limit up to ₹1,00,000 as much as possible. If you have to transfer more than ₹1,00,000, you have to do multiple transactions.
We’re on the path to a more convenient future. Payment apps are convenient as long as they work. But whether they’ll work for you depends on where you shop and even the kind of phone you are using. If you are regularly shopping at an outlet that accepts mobile payments, that’s perfect. Otherwise, payment apps can be a hassle and they aren’t reliable enough yet that you can leave your wallets at home.
Stay Tuned to Cyber Talk to know more on internet ethics and digital wellness brought to you by Anil Rachamalla, End Now Foundation, www.endnowfoundation.org