How Do Online Payments In India Work?

By Author: Sahil Verma
Total Articles: 160
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Although online payments are not a new concept, the pandemic recognized the need for us to transact digitally in our daily lives. Due to the need for contactless payment systems such as UPI, wallet payments, card payments, and so on, the pandemic acted as a catalyst in boosting India's online payments system.

During the holiday season, online payment banks discovered that 60% of consumers used online payment methods to make purchases through e-commerce portals. So, what exactly are online payments?

What are Online Payments mean in India?

Online payments are transactions that take place digitally without the use of paper money. Online payments enable hassle-free, quick, and secure payments via a secure network, from paying for online purchases to transferring money to making investments. Multiple parties, including banks and financial firms, as well as several sectors of the economy, collaborate on online/digital transactions.

To make online payments, both the sender and the receiver must have the following:

i. Bank account
ii. Online banking facility
iii. A medium through which ...
... the transmission can happen such as a bank or service provider

Different Methods of Online Payments in India

In India, several online payment methods are currently available. Online payment methods have been available for some time, but they gained traction during the pandemic lockdown. Let's take a closer look at them:

Banking Cards

Banking Cards are one of India's most widely used payment systems. Cards are very convenient, portable, and provide payment security. Debit and credit cards are the two most commonly used banking cards for online payments. These cards are widely used in both online and offline transactions. Among the well-known payment, networks are VISA, RuPay, and MasterCard.

Aadhaar Enabled Payment System (AEPS)

As the name implies, anyone with an Aadhaar card can use AEPS to conduct online/digital transactions, as long as his Aadhar number is linked to his bank account. Aadhaar holders can use AEPS to check their balance, withdraw money, make deposits, and transfer money from one Aadhaar to another. You can use AEPS for online payments if your Aadhar number is registered with the bank where you have an account. Instead of providing bank details, individuals can transfer funds from one bank account to another using their Aadhaar numbers.

For making an AEPS transaction, all you need to do is:

Visit a Micro-ATM or a business correspondent (this could even be your local store owner with the necessary device, who will function as a "micro-ATM" and assist in the completion of these instant transactions).

i. Provide Aadhaar details.

ii. Authenticate it with your fingerprint or iris scan, and then continue with your transaction.

iii. Unified Payments Interface (UPI)

UPI is the most widely used online payment gateway system, combining multiple bank accounts into a single app. A UPI application allows anyone with a bank account to send or receive money. UPI is extremely user-friendly; any UPI transaction requires only a few phone clicks. UPI also enables users to transfer funds without having to remember their bank account number or IFSC code. They only need the phone number or a Virtual Payment Address. There are several UPI apps available for both the Android and iOS platforms.

Mobile Wallets

Mobile wallets are, in essence, your virtual wallet. For secure transactions, people usually link their bank accounts to this online/digital wallet. One can download a mobile wallet app, load money into it, and use it to make purchases. Mobile wallets enable faceless and cardless payments by providing services such as sending and receiving money, merchant payments, and online purchases, among others. Several prominent banks have also launched e-wallet services.

Internet Banking

Internet banking allows users of a specific bank to conduct financial transactions online, such as transferring money, applying for loans and credit cards, closing an account, and many other things. Almost all Indian banks offer internet banking, also known as e-banking. The internet banking system is a banking network that is available all year.

The extensive range of banking services offered by internet banking makes it a popular choice among customers. Almost all online transactions can be completed with the help of internet banking.

PoS Terminals

PoS terminals, also known as Point of Sale terminals, are the locations where sales take place. For a long time, point-of-sale (PoS) terminals were those machines on the counters of malls and stores where credit or debit cards were used to pay. These are the same machines where users swipe their credit cards and enter their PINs. However, as other payment methods have grown in popularity, new PoS terminals have been installed.
Physical point-of-sale terminals can be found in shops and stores; mobile point-of-sale terminals can be accessed via a phone or tablet; virtual point-of-sale terminals can be accessed via web-based applications to make payments simple.

Mobile Banking

Mobile Banking allows you to conduct all financial transactions using your smartphone. It is an umbrella term for a variety of banking services that are available via mobile devices. Banking via mobile has grown in popularity as a result of the rise of UPI and digital wallets. Because of its convenience and speed, it is quickly becoming a popular option. Most banks have mobile banking apps where all services, such as investments, bank statements, bill payments, and so on, are available at the touch of a button.

Conclusion

Using their "Digital India" campaign, the Indian government has taken several steps to encourage people to use these online payment methods. The goal of this campaign is to create a cashless economy. Online payments allow you to keep "your money under control."