What are digital transactions ?

• Digital transactions are a system involving one or more

participants and are effected without the need for cash.
What are digital payments ?
• Digital payment is a way of payment which is made through
digital modes.
• In digital payment payer and payee both use digital modes to
send and receive money.
• Its also known as electronic payment.
• No hard cash is involved in digital payments .
• All transactions in digital payments are completed online .
• Its instant and a convenient way to make payments .
• New digital payment platforms such as UPI and IMPS are
becoming popular.
• Using these new platforms , banks have been scaling rapidly.
 New methods of digital payment
Unified payment interface Apps
• UPI is a system that powers multiple bank
accounts , several banking services features like
fund transfer , merchant payment , etc in a single
mobile application.
• It helps to make fund transfer through the mobile
app.
• So the users need to register for mobile banking ,
download the UPI app and create a UPI ID.
Immediate payment service
• Its an instant interbank electronic fund transfer service
through mobile phones which can be extended
through other channels such as ATM, internet banking ,
etc.
Bharath Interface for Money (BHIM)
• It’s a mobile app which helps in e payment directly
through bank, and allows the user to transfer money
between the bank accounts of any two parties .
Mobile wallets
• Also known as virtual wallets that stores payment card
information on a mobile device, they are a convenient
way to make payment .
• Example. Paytm , Freecharge, etc.
Traditional methods of digital payment
E Wallet
• E wallet is the digital version of physical wallet with more
functionality.
• User can keep his money in the e wallet and use it when
needed to recharge phone, send money to friends, etc.
• Using smartphone and internet connection the users can
make payment and get additional cashback offers
Net banking
• Through net banking the customers can log into his bank
account and make payments .
• All public sectors , large private sector banks allow net
banking facilities to their customers .
Cards
• Cards are provided by the banks to their account
holder. They have been the most used digital
payment modes till now. Various types of cards
are as follows :
• Credit cards – a small plastic card issued by a
bank allowing the holder to purchase
goods/services on credit. The credit card issuer
charges the customer per transaction as
transaction fees.
• Debit card – a small plastic card issued by the
bank allowing the holder to purchase
goods/services . Here there is immediate cash
flow as soon as the payment is debited.
 Advantages of digital payment
• Easy and convenient – need not carry loads of cash with
themselves
• Can pay/send money from anywhere – ona can pay from
anywhere anytime
• Discounts from taxes – government has announced many
discounts to encourage digital payments
• Written records – users might forget to make a note of their
spending or even if noting is done it takes a lot of time but
digital transactions are automatically recorded in passbook or
inside e wallet app
• Less risk – digital payments have less risk if widely used . If the
user looses phone/debit card/credit card/aadhar card no need
to worry a lot cause no one can use anyone else's money
without a pin/fingerprint. Its advised that the user should get
the card blocked if lost.
 Drawbacks of digital payment
• Difficult for a non technical person – the digital payment
modes are based on mobile phone/internet/card. These
modes are difficult for the non technical people such as
farmers , workers, etc.
• The risk of data theft – there's a big risk of data theft
associated with the digital payment. Hackers can hack the
servers of the bank or the e-wallet of the customer and get
their personal information. They can use this information to
steal money from the customers account.
• Overspending – one keeps limited cash in their physical
wallet and hence would think twice before buying anything.
But if digital payment modes are used one has access to all
his money that would result in overspending.