Digital Payments in India

Updated: Jul 11, 2020

Digital Payment (Faceless, Paperless, Cashless): Digital Payments Categories as identified by GOI




The term Digital Payment is used more generically to any NON-cash payment, but in India still, there is a large set of a population which is still in dilemma and unclarity of what are termed under Digital Payment and what not. Below is a list of major categories GOI has divided and recognized as digital payment.


Banking Cards - Debit / Credit / Prepaid

Cards (credit, debit and prepaid) issued by the bank against customers account. RuPay, Visa, MasterCard are some card payment systems used in India.

Debit and Credit Cards are most commonly used, but only limited people know about pre-paid cards.

Debit card: A debit card is a payment card that deducts money directly from a consumer's checking account to pay for a purchase.

Credit Card: lets cardholders borrow funds with which the can pay for goods and services.

Prepaid cards or Prepaid Credit Cards are issued by banks and financial institutions and can be used for transactions in a very similar way as a credit card, only difference been here amount is paid in advance to financial institutions and as per amount limit, transactions are permitted.

Can be used at: These cards can be used at PoS (Point of Sale) machines, ATMs, micro ATMs, Shops, wallets, online transactions, and for e-commerce websites.

Charges: No to the customer and 0.50% to 2.25% paid by the merchant

[IMP.] [NOTE] ATM PIN to be remembered



USSD (Unstructured Supplementary Service Data)(*99#)

This service allows mobile banking transactions using basic feature mobile phone, there is no need to have a mobile internet data facility for using USSD based mobile banking.

Key services offered under *99# service include interbank account to account fund transfer, balance enquiry, mini statement beside a host of other banking services.

Pre-requisite: Mobile number needs to be linked to the account and registered to USSD/Mobile Banking, Get MMID (Mobile Money Identifier) Or MPIN (Mobile PIN)

Charges: NIL for this system, Rs. 0.50 charged to the customer.

AEPS (Aadhar Enabled Payment System)

These are financial transaction at PoS (Point of Sale / Micro ATM) through Business Correspondent (BC) of any bank using the Aadhaar authentication. Balance Enquiry, Cash Withdrawal, Cash Deposit, Aadhaar to Aadhaar funds transfer, Payment Transactions (C2B, C2G Transactions) can be done

Pre-requisite: Aadhaar Number should be linked with bank a/c

Process: MicroATM --> Remember Aadhaar -->Give Bank name -->Present self (Aadhaar holder) with Bio-metrics (Finger and/or IRIS)

Charges: NIL to the customer; Merchant or BC may get charged or paid based on the bank‘s discretion

UPI (Unified Payment Interface)

UPI is a single platform that merges various banking services and features under one umbrella. A UPI ID and PIN are sufficient to send and receive money. Real-time bank-to-bank payments can be made using a mobile number or virtual payment address (UPI ID). Balance Enquiry/ Pay or Collect money type of banking services can be done.

Pre-requisite: Bank a/c, the Mobile number should be linked with the bank a/c, Smart Phone with internet facility, Debit Card for re-setting MPIN

Process: Download the App for UPI --> Do registration online on the App with a/c details --> Create a virtual ID --> Set MPIN --> select pay now/ collect --> mention details (A/c no & IFSC, Scan QR code, enter virtual payment Id/UPI ID)

Charges: NIL so far (*BBPS build on UPI platform charges some from merchant not normal UPI)

Mobile Wallets

A mobile wallet is a way to carry cash in digital format. You can link your credit card or debit card information in a mobile device to mobile wallet application or you can transfer money online to mobile wallet/Digital wallet ex: Paytm, Freecharge, Mobikwik, Oxigen, Airtel Money, Jio Money, etc. Balance Enquiry, add money, accept or pay money can be done.

Charges: customer pay remittances to bank a/c @ 0.5%-5% of fixed fee.


Point Of Sale

A point of sale (PoS) is the place where sales are made or where a customer tenders payment in exchange for goods and services. Multiple types of PoS are:

Physical PoS: Handheld Device with card and /or biometric reader with internet/GPRS connectivity, Collect payments from cards or AEPS

Mobile PoS: Smartphone App-based Integrated with external card and /or bio-metric reader, QR code and Bar code reader Collect payments from Cards payment, AEPS, wallet and QR

Virtual PoS: Smartphone and /or Web browser, E-payment gateway, Virtual A/c for transactions, Card, wallet & QR(with QR reader attached)

Internet Banking

Internet banking, also known as online banking, e-banking or virtual banking, is an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the financial institution's website.

National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds transfer.

Real-Time Gross Settlement(RTGS) is defined as the continuous (real-time) settlement of funds transfers individually on an order by order basis (without netting)

Electronic Clearing System(ECS) is an alternative method for effecting payment transactions in respect of the utility-bill-payments which would obviate the need for issuing and handling paper instruments and thereby facilitate improved customer service

Immediate Payment Service (IMPS) offers an instant, 24X7, interbank electronic fund transfer service through mobile phones.

Mobile Banking

Mobile banking is a service provided by a bank or other financial institution that allows its customers to conduct different types of financial transactions remotely using a mobile device such as a mobile phone or tablet. (Mobile App based)

Micro ATM

Micro ATM meant to be a device that is used by a million Business Correspondents (BC) to deliver basic banking services. The platform will enable Business Correspondents (who could be a local Kirana shop owner and will act as ‘micro ATM’) to conduct instant transactions. The micro platform will enable function through low-cost devices (micro ATMs) that will be connected to banks across the country.

The basic transaction types, to be supported by micro ATM, are Deposit, Withdrawal, Fund Transfer and Balance enquiry.


Get Inspired, Grow & Increase your Knowledge base!!!

I hope the above information gives you some more clarity on Digital Payments. I would try to explain in-depth all-important categories mentioned above in the coming days. Do provide your feedback and suggestions on the same. Cheers!! Good Luck!!

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