Digital Payments - Advantages and Disadvantages


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.

Electronic Payment is a financial exchange that takes place online between buyers and sellers. The content of this exchange is usually some form of digital financial instrument (such as encrypted credit card numbers, electronic cheques or digital cash) that is backed by a bank or an intermediary, or by a legal tender.

Advantages

E-payments have several advantages, which were never available through the traditional modes of payment. Some of the most important are:
1) Time savings. Money transfer between virtual accounts usually takes a few minutes, while a wire transfer or a postal one may take several days. Also, you will not waste your time waiting in lines at a bank or post office.
2) Expenses control. Even if someone is eager to bring his disbursements under control, it is necessary to be patient enough to write down all the petty expenses, which often takes a large part of the total amount of disbursements. The virtual account contains the history of all transactions indicating the store and the amount you spent. And you can check it anytime you want. This advantage of electronic payment system is pretty important in this case.
3) Reduced risk of loss and theft. You can not forget your virtual wallet somewhere and it can not be taken away by robbers. Although in cyberspace there are many scammers, in one of the previous articles we described in detail how to make your e-currency account secure.
4) Low commissions. If you pay for internet service provider or a mobile account replenishment through the UPT (unattended payment terminal), you will encounter high fees. As for the electronic payment system: a fee of this kind of operations consists of 1% of the total amount, and this is a considerable advantage.
5) User-friendly. Usually every service is designed to reach the widest possible audience, so it has the intuitively understandable user interface. In addition, there is always the opportunity to submit a question to a support team, which often works 24/7. Anyway you can always get an answer using the forums on the subject.
6) Convenience. All the transfers can be performed at any time, anywhere.It's enough to have an access to the Internet.Individuals can pay their bills and make purchases at unconventional locations 24 hours a day, 7 days a week,365 days a year. There is no waiting for a merchant or business to open. Debit cards and online bill payments allow immediate transfer of funds from an individual's personal account to a business's account regardless the designated place (around the globe) by few clicks without any actual paper transfer of money.
 

Disadvantages

1) Authentication/Fraud- There is no way to authenticate or verify that the individual entering the information online is who they say they are. There is no request for picture identification or even a signature. Therefore, an unauthorized user may carry out transactions in your name before you have time to alert authorities the information has been taken. Because no identifying information is provided at the time of the online payment, an individual may have an extremely hard time disputing a charge later. Further, given the benefits of convenience and speed that come along with e-payments, this creates the perfect opportunity for fraudulent credit card transactions.
2) Restrictions - Each payment system has its limits regarding the maximum amount in the account, the number of transactions per day and the amount of output.
3) Hacking - If you follow the security rules the threat is minimal, it can be compared to the risk of something like a robbery. The worse situation when the system of processing company has been broken, because it leads to the leak of personal data on cards and its owners. Even if the electronic payment system does not launch plastic cards, it can be involved in scandals regarding the Identity theft.
4) Transferring money between different payment systems.- Usually the majority of electronic payment systems do not cooperate with each other. In this case, you have to use the services of e-currency exchange, and it can be time-consuming if you still do not have a trusted service for this purpose. Our article on how to choose the best e-currency exchanger greatly facilitates the search process.
5) The lack of anonymity- The information about all the transactions, including the amount, time and recipient are stored in the database of the payment system. And it means the intelligence agency has an access to this information. You should decide whether it's bad or good.
 6) Internet access- If Internet connection fails, you can not get to your online account. There is also a pressing issue regarding the technology involved in electronic cash such power failures, internet connection failure, loss of records and undependable software. These often cause a major setback in promoting the technology


Watal Committee to review the framework related to Digital Payments

Ministry of Finance, Department of Economic Affairs had constituted a Committee on Digital Payments to review the payment systems in the country and to recommend appropriate measures for encouraging Digital Payments. The Committee was constituted on 23rd August 2016 under the chairmanship of Shri. Ratan P. Watal, Principal Advisor, NITI Aayog and former Finance Secretary to the Government of India.

Key recommendations made in the report include:  

(i) Legislative changes: The function of regulating payments should be independent of the RBI. In addition, amendments to the Payment and Settlements Act, 2007 should be made to provide for: (i) competition and innovation in the payments market, and (ii) consumer protection, among others.
(ii) Promotion of digital payments: The government should promote digital payments for its own transactions. In addition, convenience fee, service charge or surcharge currently levied on electronic payments (such as, at petrol pumps, the railways or the airlines) should be withdrawn.
(iii) DIPAYAN fund: A fund called DIPAYAN (Digital Payments Action Network) should be created using savings generated from cashless transactions. It should be used for promoting and incentivising digital payments.

(iv) Dis-incentivise cash: A cash handling charge should be levied for transactions above a certain threshold. The threshold of quoting of PAN for cash transactions should be reduced from the current threshold of Rs 50,000 for banking and Rs 2,00,000 for other transactions.

(v) Upgrade payment systems: The RBI should extent the working hours of RTGS to ensure that RTGS and NEFT facilities are available for 24x7.

 



Sunday, 25th Jun 2017, 12:09:25 AM

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