Insurance Blog

Various modes of Digital payment

As India is moving towards a cashless economy, many developments are being made to promote digital payments. To achieve this we need to reach out to rural areas, where the knowledge of using digital transaction is lacking. Indian economy can become completely cashless, if and only if the rural India gains knowledge to use digital payments.

Now the question arises as to what different types of digital payment modes are there? Let’s look into the different types of payment modes:

1.     Aadhaar enabled payment system (AEPS): You only need your Aadhaar card or the aadhaar number for AEPS. This type of payment can be done in micro ATM or bank. You need to select the type of transaction and the bank and give your finger print for authentication and get the slip on completion of payment. With AEPS you can do

a.      Account balance

b.      Aadhar to Aadhar fund transfer

c.      Cash withdrawal

d.     Cash deposit

e.     Purchase at Fair Price Shops with AEPS


2.     Unified Payment Interface (UPI): You need a SMART phone with internet facility for UPI. Download the APP (bank or third party). Choose your unique id (aadhar, mobile no.) as virtual payment address (vpa) and select the bank. Give the bank details (for the first time). Set the M-PIN for transaction. Now you can send money and collect money on demand. You can pay your bills through UPI by scanning QR code provided by your retailer or accepting the demand request sent by your retailer. To know more on AEPS and UPI click here.


3.     Credit cards/Debit cards: This is one of the easiest modes for payment. You can buy anything anywhere and how much ever you want, within the card limit. How to use it? Simple! You just need to swipe-in the card in the swiping machine or the EDC or the POS machines.

Credit card varies from debit card. Debit card allows you to spend the money which you have in your bank account. Whereas credit card allows you to borrow money, up to a certain limit from your card provider. The only problem is the safety of the card. Anyone can use the card if lost.

4.     Payment banks: Payment banks were authorized by RBI and are effective from November 2014. These are just like banks but restricted to receiving deposits only. From these payment banks you can pay for your bill, do recharge, etc. They also give interest for the money deposited. You can only deposit up to Rs. One lakh in these payment banks and not more than that. To know more about payment banks click here.


5.     Internet banking: Payments through internet banking is also one of the ways. Here you are redirected to your online banking portal and from there you can pay the bills or recharge, etc.

The only offline method for digital payment is through the usage of credit/debit cards. But why is this not widely used?

The reason being the requirement for using the card that is, you need EDC or POS machine for swiping the card. Can a roadside/platform vegetable vendor afford to have POS machine? Or other small scale business men afford the POS/EDC machine?

Paytm has come up with an idea with which even a small scale vendor can go cashless!! Paytm has introduced a new payment method which does not require internet connection.

6.     Through toll free number: Paytm has introduced payment through toll free number. How can this be done? First you need to be registered with paytm. This can be done through mobile APP or in the paytm website. Second, after registering your mobile number with the paytm, call 1800-1800-1234 from the registered mobile number and set a 4 digit paytm PIN which will be used for the transaction.

            Now for payment, you need to enter the recipient’s mobile number, amount and your Paytm PIN to successfully transfer the money from your Paytm wallet to another Paytm wallet.

Airtel Payment Bank – How is it different from a conventional bank?

Airtel became the first payment bank to be operational in India. RBI has announced licenses for 11 entities in July 2015 as payment banks. Airtel started its operations from Rajasthan through its customer support center’s Airtel Express. Airtel will spread the operations, phase by phase to pan India by March 2017.

What are Payment Banks?

RBI has formed a committee headed by Nachiket Mor in September 2013, for recommendations to ease banking system and make banking system more convenient. Recommendations included formation of “Payment Banks”.
Payment banks work similar to banks, but without assets. Payment banks were authorized to take deposits, but restricted from giving loans. Initially payment banks can take maximum of Rs.1 Lakh as deposit from a customer. The limit will be revised after 18 months of operations.


Key Takeaways:

1.     Any individual with Aadhar number can open a payment account, even if the customer is not an Airtel Subscriber.

2.     Account enrollment being paperless, customer need to provide Aadhaar number with finger prints to open an account.

3.     Account will be opened within an hour based on the facility limitations.

4.     Payment banks can issue ATM, Debit cards for withdrawal of money. But, Airtel Payment bank initially abstained from issuing them.

5.     Max limit of Airtel payment bank is Rs.1 Lakh. Deposits and withdrawals can be done from any Airtel Express showroom. Currently operational only in Rajasthan.

6.     Current accounts along with savings accounts can be taken.

7.     Airtel payment bank provides 7.25% interest rate on deposits which is very high compared to conventional banks. Most of the Public sector banks pegged interest rates to 4%, which private sector banks like kotak offering 6% with deposits more than Rs.1 lakh.

8.     Loans and credit cards are restricted to be issued from payment banks.

9.     11 firms were announced eligible as payment banks out of 41 applicants. Out of these, three have surrendered their licenses. First one being "Chalomandalam Distribution Services", then "Dilip Shanghvi, Sun Pharmaceuticals" and the latest, "Tech Mahindra".

List of entities with payment bank license:

1.   Aditya Birla Nuvo

2.   Airtel M Commerce Services

3.   Department of Posts

4.   FINO PayTech

5.   National Securities Depository

6.   Reliance Industries

7.   Vijay Shekhar SharmaPaytm

8.   Vodafone M-Pesa