Electronic Payment System in India project

Electronic Payment System In India

large-value and retail payments. The central bank played a pioneering role in automating the paper-
based clearing system in the 1980s. It introduced an electronic funds transfer system and electronic
clearing services (ECS Credit and Debit) in the 1990s.

New customer-protection measures on cards for electronic payments

The also said that it is in the process of benchmarking Indian payments systems and instruments
against global standards.

MUMBAI: The central bank would soon come up with a new set of customer-protection measures
aimed at improving user confidence in electronic payment channels, helping achieve the federal
objective of reducing the use of cash in business transactions.

The proposed Reserve Bank of India (RBI) regulations include having a common timeframe for all
authorised electronic payment systems to respond to customer complaints and setting up a
compensation framework for failed transactions.

“To have prompt and efficient customer service in all the electronic payment systems, it is necessary
to harmonise the turn around time (TAT) on the resolution of customer complaints and chargebacks,
and to have a compensation framework in place for the benefit of customers,” RBI governor
Shaktikanta Das said on Thursday in his speech after the monetary policy review. “The Reserve Bank
proposes to put in place a framework on TAT for resolution of customer complaints and
compensation framework across all authorised payment systems by the end of June 2019.”

The governor said that despite the central bank prescribing appropriate redressal mechanisms for
customer grievances and issuing guidelines to various payments system operators on paying users in
case of failed transactions, the lack of a common industry-wide mandate is resulting in non-
uniformity in complaint resolution.

“Currently various payment systems have various redressal mechanisms. We have found them to be
not uniform across the industry,” Das said.

The RBI also said that it is in the process of benchmarking Indian payments systems and instruments
against global standards. The findings of this study would be published in May 2019.

“Efficient payment systems reduce the cost of exchanging goods and services and are indispensable
to the functioning of the financial markets. The past decade has witnessed several innovations in
retail payments across the globe,” the governor said. “Benchmarking… is necessary to gauge India’s
progress against payment systems and instruments in major countries and give further impetus to
the planned efforts for deepening the digitisation of payments.”

Furthermore, the regulator would also widen by month-end the ambit of the NBFC ombudsman
scheme for customer complaints to all companies with assets beyond Rs 100 crore, including to
entities that do not accept deposits. In February 2018, the RBI had introduced the ombudsman
programme just for the customers of deposit-taking NBFCs.
WhAt is epayment system?

An e-payment system is a way of making transactions or paying for goods and services through an
electronic medium, without the use of checks or cash. It’s also called an electronic payment system
or online payment system. Read on to learn more.

The electronic payment system has grown increasingly over the last decades due to the growing
spread of internet-based banking and shopping. As the world advances more with technology
development, we can see the rise of electronic payment systems and payment processing devices. As
these increase, improve, and provide ever more secure online payment transactions the percentage
of check and cash transactions will decrease.

Electronic payment methods

One of the most popular payment forms online are credit and debit cards. Besides them, there are
also alternative payment methods, such as bank transfers, electronic wallets, smart cards or bitcoin
wallet (bitcoin is the most popular cryptocurrency).

E-payment methods could be classified into two areas, credit payment systems and cash payment
systems.

1. Credit Payment System

Credit Card — A form of the e-payment system which requires the use of the card issued by a
financial institute to the cardholder for making payments online or through an electronic device,
without the use of cash.

E-wallet — A form of prepaid account that stores user’s financial data, like debit and credit card
information to make an online transaction easier.

Smart card — A plastic card with a microprocessor that can be loaded with funds to make
transactions; also known as a chip card.

2. Cash Payment System

Direct debit — A financial transaction in which the account holder instructs the bank to collect a
specific amount of money from his account electronically to pay for goods or services.

E-check — A digital version of an old paper check. It’s an electronic transfer of money from a bank
account, usually checking account, without the use of the paper check.

E-cash is a form of an electronic payment system, where a certain amount of money is stored on a
client’s device and made accessible for online transactions.

Stored-value card — A card with a certain amount of money that can be used to perform the
transaction in the issuer store. A typical example of stored-value cards are gift cards.

Pros and cons of using an e-payment system

E-payment systems are made to facilitate the acceptance of electronic payments for online
transactions. With the growing popularity of online shopping, e-payment systems became a must for
online consumers — to make shopping and banking more convenient. It comes with many benefits,
such as:

Reaching more clients from all over the world, which results in more sales.

More effective and efficient transactions — It’s because transactions are made in seconds (with one-
click), without wasting customer’s time. It comes with speed and simplicity.

Convenience. Customers can pay for items on an e-commerce website at anytime and anywhere.
They just need an internet connected device. As simple as that!

Lower transaction cost and decreased technology costs.

Expenses control for customers, as they can always check their virtual account where they can find
the transaction history.

Today it’s easy to add payments to a website, so even a non-technical person may implement it in
minutes and start processing online payments.

Payment gateways and payment providers offer highly effective security and anti-fraud tools to make
transactions reliable.

drawbacks?

E-commerce fraud is growing at 30% per year. If you follow the security rules, there shouldn’t be
such problems, but when a merchant chooses a payment system which is not highly secure, there is
a risk of sensitive data breach which may cause identity theft.

The lack of anonymity — For most, it’s not a problem at all, but you need to remember that some of
your personal data is stored in the database of the payment system.

The need for internet access — As you may guess, if the internet connection fails, it’s impossible to
complete a transaction, get to your online account, etc.

E-commerce, as well as m-commerce, is getting bigger year after year, so having an e-payment
system in your online store is a must. It’s simple, fast and convenient, so why not have one?

Still, one of the most popular payment methods are credit and debit card payments, but people also
choose some alternatives or local payment methods. If you run an online business, find out what
your target audience needs and provide the most convenient and relevant e-payment system.

5 turning points in the history of e-payments?

Have you ever imagined how the world would look like if we had to pay for goods with a grain or the
animals we’ve just hunted? For thousands of years, it was the reality we had to cope with. Luckily,
these days are over and electronic payment methods (e-payments) are now available for everybody
and are an important part of our day to day activities and life. Nowadays paying for goods and
services is really convenient – it can be as easy as a one-time click.
It’s obvious that the development of e-payments is closely related to online commerce and follows
the improvements in that field. As you probably know and experienced, e-commerce is extremely
convenient and online payments are way more suited to customer’s requirements that traditional
payment form like cash. There are a variety of payment methods today, such as online banking,
credit and debit card, charge card or e-wallet, but take a step back and look at how it all began.

1. It all started with the World Wide Web

The origin of e-payment is, of course, related to the beginning of the internet, which revolutionized
the world like nothing before. After all, if there were no World Wide Web, there wouldn’t be online
stores and e-services.

The history of the internet starts in 1969 with ARPANET, the military network which was intended to
be communication network in the Vietnam War era. But the main turning point happened in 1989
when Tim Berners-Lee presented the solution of making information easier to publish and access on
the internet by using the so-called “sites” or “pages”.

2. The beginning of e-payment systems

Along with the internet development, pioneer online payment services started to operate in the first
half of the 90s. In 1994 Stanford Federal Credit Union was established – the first financial institution
which offered online internet banking services to all of its members. However, first online payment
systems weren’t user-friendly at all and required specialized knowledge of encryption or data
transfer protocol. What is more, the systems weren’t adapted to constant changing of users’ number
and their transactions.

In the beginning, the main players on the e-payment market were Millicent (founded in 1995), ECash
or CyberCoin (both in 1996). The majority of the first online services were using micropayment
systems and their common attribute was the attempt to implement the electronic cash alternatives
(such as e-money, digital cash or tokens).

Moreover, in 1994, the Amazon is founded (one of the e-commerce pioneers) and Pizza Hut starts
accepting online food ordering. Can you believe it? The first online delivery system was one step
ahead of all Pizza Hut’s competitors.

3. Evolution of payment possibilities

Most of the modern payment systems are easy to use with the payment process minimized to just a
few simple steps. They are website or app based, which means there is no need to install a distinct
software or buy special equipment, which was the case a few years ago. Nowadays systems are
available from any device connected to the internet.

Every year there are new solutions in e-payments world that stimulate e-commerce growth. New
players make electronic payments both easy to implement and convenient for users who pay online.
So what’s next?

4. Time for game changers

The online and offline payments are interpenetrating and the distinction between these two
becomes more and more blurred each year. It is related mainly to the dynamic growth of
technologically advanced mobile devices with the internet connection, and retailers who allow you
to pay in their brick-and-mortar stores with your smartphone are nothing exceptional nowadays.

Growing number of online buyers is noticeable, so we’re sure enough that smart technologies will be
becoming more popular than conventional banking.

5. Social networks and new technologies

It is also of the consistent popularity of social networks and online gaming. Facebook only (which was
launched in 2004) has 1,55 billion monthly active users and is still growing. Till today, the network
extends its functionality with online games, which allows us making in-game purchases.

Furthermore, mobile technologies are developing fast and customers no longer need PC’s or laptops
to buy online. The future of e-payment depends on the development of new technologies and the
role of the internet in our life.

As you see, the payments landscape is changing fast and it’s driven by new technologies. It’s obvious
that future of online payments depends on the development of the internet infrastructure. Users are
more willing to pay for intangible goods (such as online games or multimedia access) and customers
will make more payment choices.

How to define e-payments?

An electronic payment (e-payment), in short, can be simply defined as paying for goods or services
on the internet. It includes all financial operations using electronic devices, such as computers,
smartphones or tablets.

E-payments come with various methods, like credit or debit card payments or bank transfers. Note
that one of the most popular and common online payment methods nowadays are credit cards.

How e-payment works?

Online payments are made instantly, so it’s convenient and saves lots of time. It is important,
especially today when every aspect of our lives happens at a fast pace. The entire process behind the
payment button is complicated, so here’s the basics to make you understand it better.

1.Customer action – The process begins when a customer visits the merchant’s site and adds to the
cart items (products or services) they want to buy. They, then need to fill out the payment form with
certain information (e.g. card number, expiration date, CVV code, address). Depending on the
payment method, the customer is either redirected to external service or bank’s website or
continues the payment on the website or in an app.

2.Payment authentication by the operator – The payment gateway (with other parties involved)
checks whether the payment information is valid. If everything’s OK, the process continues and the
payment gateway reports back the successful transaction. After that, the customer receives a
payment confirmation — the notification is usually displayed in real-time.

3.Payment to the seller’s account – An online payment provider receives a payment from a
customer’s bank and transfers it to the merchant’s account.

In general, e-payments are considered a fast and secure alternative to traditional payment methods,
such as bank transfers, checks, etc. Accepting electronic payments comes with lots of benefits for
both merchants (of any size) and consumers.

Moreover, electronic payments are highly effective for international transactions. It is generally
cheaper, easier and faster than other payment methods. As a merchant, you don’t have to worry
about currency conversion or high commission.

Important Points About Electronic Payment Systems – Banking Awareness

Important Points About Electronic Payment Systems

Immediate Payment Service (IMPS):

1.Immediate Payment Service (IMPS) is an instant real-time interbank electronic funds transfer
system in India. IMPS offer an inter-bank electronic fund transfer service through mobile phones
available 24×7, throughout the year including Sundays and bank holidays.

2.Customers can transfer and receive funds through IMPS using their registered mobile number and
Mobile Money Identifier (MMID) or Account number and IFSC code. This facility is provided by
National Payments Corporation of India (NPCI) through its NFS switch. The participants for IMPS are
Remitter, Beneficiary, Banks and NFS-NPCI.

3.The IMPS was publicly launched on November 2010. Currently, there are 53 commercial banks, 101
Rural/District/Urban and cooperative banks, and 24 PPI signed up for the IMPS service.

Objectives of IMPS:

1.To enable bank customers to use mobile instruments as a channel for accessing their bank accounts
and funds.

2.To subserve the goal of Reserve Bank of India’s (RBI) encouraging the retail payments in electronic
way.

3.To facilitate mobile payment systems already introduced in India with the Reserve Bank of India
Mobile Payment Guidelines 2008 to be inter-operable across banks and mobile operators in a safe
and secured manner.

National Electronic Fund Transfer (NEFT):

1.National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one
funds transfer. Under this Scheme, individuals, firms and corporates can electronically transfer funds
from any bank branch to any individual, firm or corporate having an account with any other bank
branch in the country participating in the Scheme. For being part of the NEFT funds transfer network,
a bank branch has to be NEFT- enabled.

2.There is no limit on either minimum or maximum on the amount of funds that could be transferred
using NEFT. However, maximum amount per transaction is limited to 50,000/- for cash-based
remittances within India.

3.The NEFT system takes advantage of the core banking system in banks. Accordingly, the settlement
of funds between originating and receiving banks takes places centrally at Mumbai, whereas the
branches participating in NEFT can be located anywhere across country.

4.NEFT is an electronic fund transfer system that operates on a Deferred Net Settlement (DNS) basis
which settles transactions in batches. From July 2017, settlements of fund transfer requests in NEFT
system is done on half-hourly basis. There are twenty three half-hourly settlement batches run from
8 am to 7 pm on all working days of week.

5.No charges to be levied on beneficiaries but charges only applicable for the remitter. The maximum
transaction charges approved by RBI are given below:

.up to 10,000 : Rs. 2.50 + GST

.above 10,000 up to Rs. 1 lakh: Rs. 5 + GST

.above 1 lakh and up to Rs. 2 lakhs: Rs. 15 + GST

.above 2 lakhs: Rs. 25 + GST

Real Time Gross Settlement (RTGS):

1.RTGS system is a fund transfer mechanism for transfer of money from one bank to another on a
‘real time’ and on ‘gross basis’, which can be defined as the continuous (real-time) settlement of
funds transfers individually on an order by order basis.

2.This is the fastest possible money transfer system through the banking channel. Settlements in
‘Real time’ refers payment transaction is not subject to any waiting period. The transactions are
settled as soon as they are processed.

3.The RTGS system is primarily meant for large value transactions. The minimum amount to be
remitted through RTGS is 2 lakh. There is no upper ceiling for RTGS transactions. The objective of
RTGS systems by central banks throughout the world is to minimize risk in high-value electronic
payment settlement systems.

4.The RTGS service window for customer’s transactions is available to banks from 9 AM to 4.30 PM
on week days and from 9 AM to 2 PM on Saturdays for settlement at the RBI end. However, the
timings that the banks follow may vary depending on the customer timings of the bank branches.

The maximum transaction charge on RTGS was divided into two categories:

a) Inward transactions: Free

b) Outward transactions:

1.2 to 5 lakh – 30.00 per transaction,

2.Above 5 lakh – 55.00 per transaction.