Digital Payments of India

Today there are many ways of the Digital payment. More and more people are adopting these methods as for the convenience and record.

What is Digital Payment?

Digital payment is a way of payment which is made through digital modes. In digital payments, payer and payee both use digital modes to send and receive money. It is also called electronic payment.

Modes of Digital Payments

  1. UPI apps
  2. QR Code
  3. AEPS
  4. USSD
  5. Cards
  6. E-Wallets

No hard cash is involved in digital payments. All the transactions in digital payments are completed online. It is an instant and convenient way to make payments.

This process is automatic and neither you nor the shopkeeper is required to visit the bank. It saves you from long queues of ATMs and banks.

  1. UPI apps
    UPI or unified payment interface works through the mobile. You can either use Mobile apps or USSD technology.

In this method the fund gets transferred between the two accounts immeidately. The system works 24 x7 all days. As of now there is no charge for this payment.

To use the UPI payment method, you have to download the one of the UPI apps. There are scores of UPI apps, such as Phonepe, Google Pay, SBI Pay, BHIM etc.

In the beginning, you have to go through the registration process. In this process your bank account gets linked using your mobile number.

You have to also set an UPI PIN for the linked bank account. This PIN is required for making a payment.

UPI apps are a faster solution to send money using VPA or even IFSC and account number. But they have some limitations also.

  1. QR Code
    You must have seen the QR code in the shops. This payment method is also based on the UPI. The money is immediately transferred from one account to another.

To make payment through the QR code you must have the UPI App. The app scans the QR code to fetch the details of the merchant.

Once you have the name of the merchant, you can make payment immediately. Thus in this method, you pay to a person without knowing the account number, UPI ID or mobile number.

You have to enter the UPI PIN to complete the transaction.

  1. AEPS
    AEPS is an Aadhaar based digital payment mode. The term AEPS stands for Aadhaar Enabled Payment Service.

Customer needs only his or her Aadhaar number to pay to any merchant. AEPS allows bank to bank transactions. It means the money you pay will be deducted from your account and credited to the payee’s account directly.

You need to link your Aadhaar number to your bank account to use AEPS. You can use AEPS with the help of PoS (Point of sale) machines. You can withdraw or deposit cash, send money to another Aadhar linked account with it.

The good thing about AEPS is that it doesn’t need your signature, bank account details or any password. It uses your fingerprint as a password. No one can forge your fingerprints, thus it is the most secure digital payment mode.

  1. USSD
    USSD banking or *99# Banking is a mobile banking based digital payment mode. This method is also based on the UPI System. But this method, does not require a smartphone or internet connection.

You can easily use it with any normal feature phone. USSD banking is as easy as checking your mobile balance.

You can use this service for many financial and non-financial operations such as checking balance, sending money, changing UPI PIN etc.

The *99# code works as a bridge between your telecom operator’s server and your bank’s server. It uses your registered mobile number to connect with your bank account. Hence, dial *99# with your registered number only. USSD banking has a transaction limit of Rs. 5000 per day per customer. RBI has also set a maximum charge of Rs. 2.5 per operation.


Cards are provided by banks to their account holders. These have been the most used digital payment modes till now.

Many of us use cards for transferring funds and making digital payments. Credit cards, debit cards and prepaid cards are the main types of cards. You can also use Rupay debit card for digital payments.

Credit cards are issued by banks and some other entities authorized by RBI. These cards give you the ability to withdraw or use extra money. Credit cards are used for domestic as well as international payments.

Debit cards are issued by the bank where you have your account. You can use these cards for the money in your account. The payments you make with these cards debit from your account and credit immediately to the payee’s account. You can use these cards to make payments to one bank account to another.

Prepaid cards are another type of cards which you use to pay digitally. You must have to recharge these cards before using just like prepaid SIM cards.

Cards are one of the best modes when you pay at portals or E-commerce sites. But if we talk about paying to merchants it is not the most suitable way. It charges 0.75% – 2.0% on transactions. Also, you cannot use cards to pay if the merchant does not have a PoS (swipe) machine.


E-wallet or mobile wallet is the digital version of your physical wallet with more functionality. You can keep your money in an E-wallet and use it when needed.

Use the E-wallets to recharge your phone, pay at various places and send money to your friends. If you have a smartphone and a stable internet connection, you can use E-wallets to make payments.

These E-Wallets also give additional cashback offers. Some of the most used E-wallets are State bank buddy, ICICI Pockets, Freecharge, Paytm, phonepe etc.

E-Wallets are an easy and faster way to make payments but have some limitations. These apps are good if you send money to a wallet to another. But if you want to send money to a bank account e-Wallets are not suitable.

Also, you have to be extra careful with these apps. These apps do not ask for any PIN or password when you perform a transaction using your wallet money. If you do not lock your phone, anyone can use the money in your wallet. I suggest you must lock your phone if you want to use E-Wallet apps.

Advantages of Digital Payments

Easy and convenient
Digital payments are easy and convenient . You do not need to take loads of cash with you. All you need is your mobile phone or Aadhaar number or a card to pay. UPI apps and E-Wallets made digital payments easier.

Pay or send money from anywhere
With digital payment modes, you can pay from anywhere anytime. Suppose your close friend’s mother fell ill at night. He called you at midnight and asked some money. Don’t worry, you can send money to your friend using digital payment modes such as UPI apps, USSD or E-Wallets.

Written record
You often forget to note down your cash spendings. Or even if you note, it takes a lot of time. But you do not need to note your spendings every time with digital payments. These are automatically recorded in your passbook or inside your E-Wallet app. This helps to maintain your record, track your spendings and budget planning.

Less Risk
Digital payments have less risk if you use them wisely. If you lose your mobile phone or debit/credit card or Aadhar card you don’t have to worry a lot. No one can use your money without MPIN, PIN or your fingerprint in the case of Aadhar. But it is advised that you should get your card blocked if you lost it. Also call the helpline of your E-wallet to suspend the wallet account to prevent anyone from using your wallet money.

Drawbacks of Digital Payments:
Every coin has two sides so as the digital payments. Despite many advantages, digital payments have a few drawbacks also.

Difficult for a non-technical person
As most of the digital payment modes are based on mobile phone, the internet and cards. These modes are somewhat difficult for non-technical persons such as farmers, workers etc.

The risk of data theft
There is a big risk of data theft associated with the digital payment. Hackers can hack the servers of the bank or the E-Wallet you are using and easily get your personal information. They can use this information to steal money from your account.

You keep limited cash in your physical wallet. Hence, you think twice before buying anything. But if you use digital payment modes, you have all your money with you always. This can result in overspending .

Cashless payments are more convenient than cash payments. You do not need to carry a lot of cash with you all the time. You can make digital payments in seconds.

The change is not a concern with digital payments when you can pay the exact amount. You will also have all your payments recorded automatically.

We all love simplicity and ease. Hence, we can say that Digital payments is the future of fund transfer and money transactions.

Scroll to Top