What is digital payment? - Overview, methods & benefits

You are strolling through a bustling marketplace. A beautiful wristwatch catches your eye and you decide to buy it. But wait, you are not carrying your wallet, which means you have no cash, debit card or credit card on you. As you dejectedly start to walk past the shop, you suddenly remember that your mobile phone is with you. You can pay using a mobile wallet. If the balance in your wallet is insufficient, you can pay using your UPI handle that is linked to your bank account. Feeling happy, you walk into the store and ask to see the watch. In no time, it is on your wrist!

Digital payments have revolutionised how you manage your finances. From online shopping to money transfers, digital payments have transformed traditional banking practices.

Key benefits of digital payments

Electronic or cashless payments enable you to use money digitally without the need for liquid cash. Given that everyone today has access to the internet and smartphones these days, the digital payment system is rapidly gaining momentum in India because of the following benefits:

Convenience: You don't have to stand in long ATM queues or visit your bank to withdraw cash. You also don’t have to stand in queues to pay your essential bills such as your electricity or mobile bill. All this can be through digital payments, which enable you to send or receive money quickly at any time, anywhere.
Secure: The transactions done through UPI apps, Debit/Credit Cards or mobile wallets are enabled with high security features. Since the transactions are processed digitally, the scope of human error or fraud is low.
Global reach: You can purchase from a seller who is based in another country. Businesses can thrive by setting up digital payment systems to reach a wider audience.

Owing to these features, digital payment methods have become popular. This has led to the birth of various digital payment methods, which can be used in different ways, thanks to their online nature.

Some digital payment methods and their uses

UPI (United Payment Interface) is a system that consolidates multiple bank accounts into a single app to facilitate seamless money transfers. The advantage of UPI is its ability to enable direct payments from your bank account, eliminating the need to input your details manually. For example, the BHIM app uses the UPI interface for money transactions. Once you download the UPI app on your mobile phone, you can link it to your bank account and seamlessly use it for all your payments. Anyone with a bank account can accept or pay via UPI. Today, most merchants and even street vendors accept UPI payments, making it possible to ditch your wallet with physical cash while shopping.
Banking cards such as Debit, Credit, and Pre-paid Cards enjoy popularity due to their convenience and high security features. Although they are plastic cards, they are very useful for making online payments. Today, you can even link your Credit Card with your UPI app for easy payments. Besides, Credit Cards offer numerous benefits. For instance, Axis Bank is presently providing a limited lifetime free offer on select Credit Cards along with cashback and rewards on dining, entertainment and travel expenses.
Unstructured supplementary service data (USSD) helps in making mobile banking transactions without internet by simply dialling *99# on any basic feature phone.
Bharat Bill Payment System (BBPS) was conceptualised by the RBI in 2017. It serves as a centralised payment mechanism aimed at streamlining bill payments nationwide. It includes payments for utilities, mobile/cable recharge, loan EMIs, Credit Card payments, insurance premiums and much more. Most bank websites offer BBPS today, and there is no charge for using it.
Mobile wallets are digital wallets to safely carry your cash. You can link your bank accounts or cards with the wallet and add funds for money transfers. Many banks have their own mobile wallets. Axis Bank offers Masterpass, which stores your card details and address, providing a seamless online shopping experience. Many mobile wallets also have tie-ups with partner merchants and offer reward points or discounts when you make purchases.

Also Read: Top 5 reasons to open a Digital Fixed Deposit

Conclusion

In the world of digital payments, there is no need for physical money. People from anywhere can buy and sell things easily. It's like a big global market where everyone can join in. You just need to agree to buy or sell something online, and the deal is done. It's like shaking hands or making a trade, but it's all done over the internet! With careful monitoring of your digital wallet, you can keep your money safe.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.