Digital Transactions in India

• 10 Nov 2018

Over the past two years, i.e. since 2016, Digital payment transactions have registered tremendous growth in India.

• New payment modes – Bharat Interface for Money-Unified Payments Interface (BHIM-UPI), Aadhaar enabled Payment System (AePS) and National Electronic Toll Collection (NETC) – have transformed digital payment ecosystem by increasing Person to Person (P2P) as well as Person to Merchant (P2M) payments.
• At the same time existing payment modes such as debit cards, credit cards, Immediate Payment Service (IMPS) and Pre Paid Instruments(PPI) have registered substantial growth.

Bharat Interface for Money-Unified Payments Interface (BHIM-UPI)

• BHIM is developed by the National Payment Corporation of India (NPCI).
• It is an initiative to enable fast, secure, reliable cashless payments through the mobile phone. BHIM is based on Unified Payment Interface (UPI) to facilitate e-payments directly through bank.
• It is interoperable with other Unified Payment Interface (UPI) applications, and bank accounts. Unified Payment Interface(UPI) is an instant payment system built over the Immediate Payment Service (IMPS) infrastructure and allows instant transfer of money between any two parties bank accounts.

Aadhaar enabled Payment System (AePS)

• AePS is developed by the National Payments Corporation of India (NPCI) that allows people to carry out financial transactions on a Micro-ATM by furnishing just their Aadhaar number and verifying it with the help of their fingerprint/iris scan.
• With the help of this payment system, funds can be transferred from one bank account to another simply through their Aadhaar numbers.
• This system adds another layer of security to financial transactions as bank details would no longer be required to be furnished while carrying out these transactions.

National Electronic Toll Collection (NETC) 

• NETC was developed by National Payments Corporation of India (NPCI) in 2016 for electronic toll collection at toll plazas using FASTag.
• FASTag is a device that employs Radio Frequency Identification (RFID) technology for making toll payments directly while the vehicle is in motion.
• FASTag (RFID Tag) is affixed on the windscreen of the vehicle and enables a customer to make the toll payments directly from the account which is linked to FASTag.
• RFID (Radio Frequency Identification) tagging is a system that uses small radio frequency detection devices for identification and tracking purposes.

National Payments Corporation of India (NPCI) 

• National Payments Corporation of India (NPCI), an umbrella organisation for operating retail payments and settlement systems in India, is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007.
• It is a “Not for Profit” Company under the provisions of Section 25 of Companies Act 1956 (now Section 8 of Companies Act 2013), with an intention to provide infrastructure to the entire Banking system in India for physical as well as electronic payment and settlement systems.

Unified Payment Interface (UPI)

• It is an advanced version of Immediate Payment Service (IMPS)- round–the-clock funds transfer service to make cashless payments faster, easier and smoother.
• This is a payment system that allows one to send money from bank account the way one sends an SMS or email.