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You are buying products from an online store. What would be your choice of payment? Is it Cash on Delivery or other options? I know a majority of people reading through this would have chosen other options. The other option is what we call Digital or cashless payments.
Digital payment refers to any electronic transfer of funds between a buyer or seller for goods or services purchased. It involves the use of digital or online platforms to initiate, authorize, and complete transactions. In this digital era, people prefer digital payments as they provide a convenient, secure, and efficient alternative to traditional payment methods like cash or cheques.
The rise of Digital payments has led to the rapid growth of e-commerce as it has been closely intertwined. Let us explore the crucial role of digital payments in e-commerce, their advantages, and the most commonly used payment methods, and address the growing need for a seamless and secure online transaction experience.
Advantages of Digital Payments in E-commerce
Convenience and Efficiency:
Digital payments provide unparalleled convenience for online shoppers. Instead of carrying physical cash or dealing with complex payment procedures, customers can make purchases with just a few clicks, whether they are using credit/debit cards, mobile wallets, or other digital payment options. This gives a structured shopping experience, reduces confusion during checkout, and increases customer satisfaction.
Digital payment methods are not restricted by physical limits, allowing e-commerce businesses to serve across the globe. E-commerce platforms can easily take payments from customers all around the world if they have the proper digital payment infrastructure. This creates a wide range of market prospects and aids in helping organisations go beyond conventional bounds.
Digital payments give a high priority to security by using strong authentication and encryption techniques to safeguard confidential financial data. Customers may feel secure knowing that their payment information is safe, reducing the likelihood of fraud or identity theft. This creates a favourable atmosphere for e-commerce by fostering confidence in secure transactions.
Improved Conversion Rates:
Digital payments greatly impact conversion rates in online shopping. Businesses may decrease cart abandonment rates and boost successful purchases by providing a range of payment alternatives and a smooth checkout process. Simplifying the payment process encourages customers to finish their orders, resulting in increased conversion rates and better revenue generation.
Digital Payments in India:
In India, digital payment methods have gained significant traction in recent years, driven by government initiatives and technological advancements. Here are some commonly used digital payment methods in India:
Unified Payments Interface (UPI):
The National Payments Corporation of India (NPCI) has created UPI, a payment system that enables users to connect their bank accounts to a mobile app like PayTm, PhonePe etc and quickly transfer money using a virtual payment address or by scanning QR codes. UPI has become extremely popular because it is easy to use and allows for seamless transactions between different platforms.
Mobile wallet apps are widely used in India for digital payments. Paytm, PhonePe, Google Pay, and Amazon Pay are some popular mobile wallet providers. Users can load funds into their mobile wallets and use them to make payments for various services like bills, recharges, online shopping, and peer-to-peer transfers. These wallets also provide additional features like cashback, discounts, and loyalty rewards.
Aadhaar-enabled Payment Systems (AEPS):
AEPS uses India’s biometric identification system, Aadhaar, to allow people to make payments using their fingerprints or iris scans. By linking their Aadhaar number to their bank account, individuals without smartphones or traditional banking access can participate in digital transactions, promoting financial inclusion.
Bharat Interface for Money (BHIM):
BHIM is a mobile app launched by the NPCI that provides a simplified UPI-based payment interface. It allows users to make instant payments, check account balance, and generate QR codes for receiving payments. BHIM aims to make digital payments accessible to a wide range of users, including those who may not be tech-savvy.
Credit and Debit Cards:
Credit and debit cards are widely used for digital payments in India. These cards are issued by various banks and allow users to make payments online and at the point-of-sale (POS) terminals. With the increasing penetration of card acceptance infrastructure, card-based payments have become a popular choice for in-store and online transactions.
Internet banking allows users to initiate digital payments directly from their bank accounts. Customers can log in to their bank’s online portal or mobile app and transfer funds to other accounts, pay bills, or make online purchases. Internet banking provides a secure and convenient way to manage finances and make digital payments.
Immediate Payment Service (IMPS):
IMPS is an instant interbank electronic fund transfer service available in India. It enables users to send and receive funds in real-time, 24/7, using their mobile phones or internet banking. IMPS facilitates person-to-person (P2P) transfers, online shopping payments, and bill payments.
Prepaid instruments like gift cards and prepaid wallets are commonly used for digital payments. These instruments allow users to load funds in advance and utilize them for purchases or bill payments. They offer convenience and flexibility, particularly for gifting or budgeting purposes.
Digital payments have transformed the world of online shopping, benefiting both businesses and consumers. In India, there has been a significant increase in the adoption of digital payments, driven by various methods like UPI and mobile wallets for their convenience, speed, security and global reach thereby revolutionizing transactions. As technology continues to progress, the digital payment landscape in India is expected to grow and meet the demand for seamless and secure online transactions promoting a cashless economy.