With disruptive innovations transforming the digital payments space, India is slowly moving towards a cashless economy.
Not too long ago, we dealt only in cash or cheques, and were even conservative in our use of debit cards or cash machines, let alone Internet banking or shopping. But disruptions in the digital space have not only revolutionised the way we pay and manage our finances, they have also made contactless and cashless transactions the preferred choice of many among us. And, with digital wallets, Quick Response (QR) codes, near field communication (NFC) technology, sound wave systems, virtual cards and, more recently, the Unified Payment Interface, or UPI, offering top-notch secure payments options, the smartphone has become the most sought-after all-in-one device.
Unified Payment Interface
The National Payments Corporation of India was set up by the Reserve Bank of India and Indian Banks' Association to come up with UPI, the most advanced payment system that has taken digital payments to a whole new level.
UPI is a secure, mobile-first, open-source, pull and push platform that will allow transfers of up to Rs1 lakh for 50 paise per transaction. Says Abonty Banerjee, Senior General Manager, ICICI Bank: "It is the simplest mode of making payments that aims to provide users with the convenience of completing transactions in fewer steps than earlier, thereby reducing the transaction time."
The UPI app uses a 'virtual payment address' to both send and receive money directly from and to your bank account without sharing details of the account, credit or debit card. "UPI is another layer built on top of IMPS, which eliminates all the details needed by IMPS just by a virtual ID. It will allow more transactions to happen digitally," says Promod Sexena, Chairman and founder, Oxigen Wallet.
How it works. Once you login to the UPI-enabled bank app and select payment options, you can enter the recipient's virtual ID, the amount and your account number. Once the confirmation screen appears, enter the M-PIN. Following the transaction, the app provides a single-click two-factor authentication solution. To receive money, enter the virtual ID of the person you are requesting the payment from to send a request notification on his or her smartphone. Once the person verifies the details and authorises the payment by keying in his or her M-PIN, the amount will be credited to your account. UPI can also be used on a PC, but one needs to keep the registered mobile number within reach to receive notifications and OTPs to complete the transaction. At present, 21 banks offer UPI facilities, including ICICI Bank and Axis Bank.
Mobile wallets are easy to operate and are rapidly gaining in popularity because of the high security and encryption methods they offer. They are mostly used to pay utility bills and buy movie tickets, as well as for online shopping and app-based cab-hailing services.
Online ticketing firms, such as MakeMyTrip, Yatra, Ibibo, Cleartrip, IRCTC, redBus, Bookmyshow, and top e-commerce companies, including Flipkart, Snapdeal, Amazon, Myntra and Jabong, have their own e-cash payment options and offer striking discounts to attract customers. Online players also accept payments from other digital wallets such as Paytm, Oxigen and Mobikwik, which also offer and attractive deals - discounts and cashback options. According to Upasana Taku, founder and CEO, Mobikwik, it is better to opt for the digital wallet of the brand you are buying from to get customised offers for their products, and to get smooth service.
Some digital wallet companies like Oxigen and ICICI Pockets allow customers to send and receive money through popular platforms, including Facebook, WhatsApp, Twitter, Email and Google+, among others.
How it works. Digital wallets allow you to transfer money just by sending an SMS. One has to register with the app and load the wallet through net banking to make payments. Others like Mobikwik, allow customers to recharge the wallet even with cash and pick-up services are available for free.
Mobile wallet companies are also using the QR code scanning method for payments. QR code is a machine-readable matrix that can be read by a compatible smartphone to make payments. QR code has been in use for a long time for non-payment activities such as redeeming vouchers, marketing and advertising. For instance, Pockets, the ICICI bank digital wallet, allows cashless payments from smartphones by simply scanning an 'mVisa' QR code at a merchant location, without swiping the credit or debit card on an EDC machine. "The services are preferred as it provides enhanced security with the card remaining in the possession of the customer," says Banerjee. HDFC Bank and Paytm also offer QR code scanning.
How it works. To make a payment one must login to the app and scan the printed QR code with the help of the primary camera of the Smartphone to get it activated automatically. Once the payments page appears, key in the amount and confirm the payment details by entering the PIN or a security code. An email and an SMS are sent on the registered mobile number confirming the transaction.
Service providers, such as ToneTag and UltraCash, allow consumers contactless communication and to make cashless payments with an app linked to their bank accounts. Sound waves from the phone enables the payment with the software algorithm encoding data into sound waves that could be transmitted using a basic speaker. "The technology is highly interoperable, working on most existing infrastructure. The ability to pay in-app through phone ensures a frictionless payment and shopping experience," says Kumar Abhishek, founder and CEO, ToneTag.
The sound wave technology enables cardless cash withdrawal at any bank ATM through a cardholder's registered mobile number, as well as person-to-person payments in proximity through sound waves without exchanging any personal information. It also enables mobile payments at unattended terminals such as ticket vending kiosks or vending machines, and makes cash-on-delivery convenient and hassle-free.
To use this technology, one needs to have an enabled app that can be integrated with other banking apps or digital wallets. ToneTag, the Bangalore-based fintech company, has incorporated with mobile banking apps, such as YesPay of Yes bank, Mobo Money of Kotak Mahindra and PaysApp from HDFC BAnk. Merchants must have mobile phones or card readers that can be used with a software upgrade, without any additional hardware.
How it works. To make a payment one needs to go to the 'pay to merchant' option from any sound wave payment-enabled app. The merchant's device sends the encrypted payment bill through sound waves, and the buyer's phone receives it through the microphone. After the merchant keys in the payment details and initiates payment from his or her device, data is transmitted through sound signals to the buyer's phone. To complete the payment the buyer confirms the details to pay through a digital wallet, or debit or credit card.
Virtual cards were initially issued for existing card holders, who wanted to minimise online exposure of cards. Now, one can get virtual cards on his or her mobile phones for all kinds of online payments. For instance, Oxigen wallet uses the VirtualE prepaid VISA feature to make payments. A virtual card are like normal multi-use debit cards with a 16-digit number, expiry date and three-digit CVV number. The only difference is it is not available physically, but is embedded in a wallet app. These cards can be for self-use or can be sent to other people via email or SMS. Even without a bank account, Oxigen wallet lets one pay through their app, wherever VISA services are accepted. "To make a payment on any online portal, choose the debit card option and then enter the virtual card details. These cards can be kept for later use or can be discarded after each transaction," adds Sexena.
HDFC bank's PayZapp enables customers to create a wallet that can then turn into a virtual card and be used for all transactions. FreeCharge, a fintech company enables its wallet users to create a virtual card with MasterCard making it payable on any platform, wherever MasterCard is accepted.
ICICI bank's HCE (Host Card Emulation) technology helps create a virtual card for physical credit or debit card for both Visa and MasterCard. ICICI customers can make electronic contactless payments from NFC-enabled smartphones.
How it works. To make a payment, one needs to choose the debit card option and enter the virtual card details to make a payment.
NFC is the trending buzzword for digital payment systems. It is a contactless payments system that uses smartphones. The technology allows one to make payments just by waving their phones near the merchant's terminal. SBI cards and ICICI bank offers NFC-enabled cards, but has not been well accepted in India. Says Amit Veer, Vice President, Paytm: "The biggest challenge for using NFC is it needs to have a point-of-sale machine, which is NFC-enabled. Along with this, it is capital-intensive, and includes some bit of training both for the merchant and the consumer."
How it works. To use this technology for payments, a contactless reader machine must be installed in the payment terminal. One has to wave the card from a distance 4 cm from the data-capture machine to make a payment.
Disruptive innovations are fast changing your surroundings. If you do not want to be left out, embrace the world of cashless transactions and be a winner.