Digital Payments – Concept, Types, Future Prospects, Benefits, Cons & moreLast Updated Date: Sep 02, 2023
Digital payments have become a household term nowadays. Gone are the days when making payments compulsorily involved cash or cheque.
With the need for more convenient payment methods within the consumers, the financial world has developed payment methods that are extremely convenient and hassle-free.
These are what we call digital payments. They have indeed taken the world by storm and are rapidly making payments across the world more cashless.
There is more of a digital economy in development around the world.
The governments of various nations are taking the initiative to promote digital pay due to its various benefits.
What are Digital Payments?
Advancement in technology and digitalization has completely changed the way the world functions. The same applies to the transactions that we carry out daily.
Digital payments refer to the buying or selling of goods or services, which is, making a purchase, and paying through a digital medium. This means there is no involvement of cash or cheque.
Online Payments are also what we call electronic payments. People widely use it on a day-to-day basis.
There has been a sudden growth of digital payments we can see worldwide.
Especially when it comes to online payment via mobile phone, People initially were skeptical about the security risks of digital payment.
However, within a few years, digital payment methods have successfully overcome the same by developing more security for the privacy of information.
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Types of Digital Payments
Depending on the aspect under consideration digital payments can be of various types.
However online payment can be broadly classified into three categories, that is card payments, bank transfer payments and E-wallet payments.
The most widely used digital payment method, especially among millennials is card payment. This includes credit and debit cards for example visa, MasterCard, etc.
Card payments are popular because of the convenience and ease of use. Again with the type of card being used, it can be either direct bank to bank transfer or can involve a third party.
Generally, card payment requires a security pin to make the transactions. However, some cards make transactions by simply swiping.
Even though the latter might seem convenient it has many risks. For example, if you lose a card, anybody can make unauthorized payments and transactions.
Bank Transfer Payments
In bank transfer payments the money is directly transferred from one bank account to the other by different methods.
The best part about bank transfer payments is the fact that, as a business owner, one does not need to have a special setup for the same.
Bank transfer payments are also safer, cheaper and a lot less hassle-free as compared to other digital payment methods.
One can easily transfer money from one account to another from basic account details via the internet.
The most popular digital payment method amongst youngsters is e-wallet payments.
E-wallets store the card information in a person’s mobile phone via different apps. Some popular e-wallet apps include Paytm, Phonepe etc. E-wallet is also popular for in-app purchases.
There has been a sudden bloom of E-wallet payment method users in the last few years, because of the extensive marketing strategy that the firms have adopted.
This includes cashback, benefits of joining, popularity as a trend etc.
E-wallet is all set to take over as the most widely used and convenient money transfer method, especially among the newer generation.
To add to the security of e-wallet payments, many governments are taking steps to identify and ensure the identity of the person who are creating an account for the same.
For example, KYC and card details are essential to use an e-wallet in India.
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Advantages of Digital Payments
Even though digital payments are extremely convenient, fast and efficient, they come with their own advantages as well as disadvantages.
The biggest advantage of using online payment is hassle-free payments. Because digital payment does not include cash or cheque there is more security by using this method of money transfer.
Moreover, using digital payments enables better record keeping and track of money transfers. This is because all of the data is stored and can be referred to as per need.
Unlike traditional payment methods, there is no fear of losing money or getting fake currency when using digital pay.
There is added transparency in transactions. Moreover, money transfer cost also reduces.
It enable the transfer of money from anywhere at any time. This is great for remote merchants because transactions become easier.
When using online payments users have to initially provide sensitive information like bank account details, password, other details at various platforms.
This makes them vulnerable to cybercrime.
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Disadvantages of Digital Payments
Speaking about the disadvantages of digital payments, security concerns are a huge drawback.
This brings the need to invest more in financial security when it comes to using online payments as a business owner.
The information shared to various platforms while using digital payment methods is extremely sensitive and therefore one must take precautions to keep the information safe and secure.
Another drawback to digital transactions is the fact that if an unauthorised person gets access to the required information and details he can easily transfer money.
Online frauds are common and mostly happen due to negligence. Hacking to gain personal and bank information is common.
It is a punishable offence but is widely done by many people to commit frauds. Without taking proper security steps and precautions one can easily fall for the same.
Therefore, it is extremely important to be an aware user. Regardless of the disadvantages, it has a bright future.
This is because it caters for the variation in needs and adds to comfort and convenience. People can now easily transfer money, within a few seconds with the help of a mobile phone itself.
With the rate at which digital payments and transactions are gaining popularity, a cashless society is not far away.
Cashless society means a society in which all payments are done in digital transactions. There is no involvement of cash or cheques.
Even though a cashless society might seem ideal it can happen. It comes with its advantages and disadvantages just like digital transactions.
For example, in a cashless society, the crimes rate will go down because there will be no transit money to steal.
However, at the same time, cybercrime rates might go up in an attempt to steal the financial data of a person.
A cashless society will also make trials a lot easier because there will be records of transactions available at all times.
As impossible as a cashless society might seem it will happen in the future because the online payments method is taking over the world.
Conclusion – Digital Payments
Be it bill payments, shopping recharges, etc, digital payments make everything easier. Online payments are extremely convenient and hassle-free.
However, using the same brings about security risks and concerns that require precautions. Especially for businesses, investing in financial data security is important.
Moreover, because businesses have the database of various customers it becomes even more important to keep this data protected and safe from cybercriminals.
As long as the right security steps are followed, digital pay are extremely beneficial for both the consumer and the seller.
One can choose from multiple payment methods. However, these digital payment methods are interlinked when seen with a practical approach.
E-wallets have gained great popularity because of their convenience as well as the government’s efforts in promoting online cashless payments.
A common example is the digital India campaign by the government of India.
In fact in India especially after demonetization, there was a sharp rise in the use of digital payment methods because of the launch of the digital India movement.
The rise and reach of the internet are also responsible for the development of digital payment.
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