Card Based Digital Payments Class 7

Modes of Card Based Digital Payments

Digital payments done using plastic cards are known as card-based digital payments.

Payments Acceptance Ecosystem

The Payments Acceptance Ecosystem generally comprises acquirer, issuer, payment gateway, and payment aggregators.

Four components of the payment acceptance ecosystem:

1. Acquirer: An acquirer is a bank that is in contract with merchants to accept card-based payments for goods and services. The acquirer installs the payments acceptance machine such as PoS to accept the cardholder payments at the merchant locations.
2. Issuer: An issuer is a bank that issues banking cards such as debit cards to its customers.
3. Payment Gateway: A payment gateway facilitates the transfer of information between a payment portal (such as a website, mobile phone or Interactive Voice Response) and the Front End Processor or acquiring bank. Payment gateways protect sensitive information and ensure that information is passed securely between the customer and the merchant as well as between the merchant and the payment gateway.
4. Payment Aggregator: A payment aggregator is a service provider that registers and enables e-commerce merchants to accept various payment modes and process e-commerce and mobile payment transactions, without the need of merchant setting up a separate bank account. An example of a payment aggregator in India is Razorpay.

Use of Banking Cards

1. Debit Cards
2. Credit Cards
3. Prepaid Cards

Virtual Cards

Virtual credit cards are usually one-time non-physical cards issued by a bank or card provider to perform an online transaction. Virtual cards exist in only digital form. They are used primarily by customers who wish to minimise their risk while making an online transaction, post which they expire automatically

Co-branded Cards

Sometimes, banks collaborate with retailers or service providers to issue credit cards with specific benefits to cardholders. These cards carry the logos and branding of both the bank and the retailer. Thus, they are known as co-branded cards.

These cards provide reward points to customers while shopping with them. For example, a petrol credit card. Every time a user uses it to purchase fuel, they receive redeemable reward points or cashback, a small percentage of the total bill.

Guidelines for the Use of Banking Cards

Various Channels for Acceptance of Card-Based Digital Payments

Point of Sales (PoS)

Benefits of Using PoS to the business owners:

1. Faster Process: PoS makes the sales process more efficient by removing the rush at the cash counter.
2. Inventory Management: It makes it possible to track product and inventory status at the click of a button, paper calculation is not required.
3. Sales Report: It becomes easy and convenient to generate a sales report at any time.
4. Regular track of income and profits: It enables the store owner to keep regular track of his income and profits.

mPoS ‒ Mobile Point of Sales

Once the card is swiped, the application encrypts the data and sends the encrypted data to the server for authentication.

Steps in the use of mPoS:

1. Log in to the application (user id and password).
2. Select a transaction type in mPOS application, e.g. Card Sale.
3. Select the amount and enter four digits of the card number (as in a traditional POS device) .
4. Swipe/Dip the card – (at this time, the application powers the card reader through Bluetooth/Audio jack and accepts the device’s encrypted data). The PIN will be captured appropriately.
5. The transaction is sent for authorisation.

Soft PoS

Soft PoS is an innovative payment acceptance segment, which uses ‘Tap-on-Phone’ technology. This technology allows merchants to accept payment from contactless cards directly on their Near Field Communication (NFC) enabled android mobile devices via software-based payment application, without any additional connected hardware.

This Tap-on-Phone technology has the same functionality as the regular PoS/mPOS for contactless payment acceptance. However, as the functionality can be directly enabled on the merchant mobile handset, this makes the product affordable and enables more extensive market penetration.

E-commerce Payment

These are transactions conducted over the internet through the use of online banking or banking cards. India’s e-commerce industry is a multi-billion dollar industry with a vast customer base.

Automated Teller Machines (ATMs)

Benefits of ATM to Banks

1. Increases customer satisfaction as they can access bank’s services 24x7.
2. Reduces crowding at bank branches as many cash and account-related services are handled at ATMs.
3. It helps in enhancing customer loyalty as ATMs act as additional channels to service customers.
4. With ATMs being interoperable, a bank with less number of ATMs can also have their customers use other banks’ ATMs for various services.

Benefits of ATM to Customers

1. Reduced visits to a bank branch.
2. Shorter travel time as ATMs are situated nearby.
3. Convenient access to cash 24x7.
4. Additional services such as balance inquiry, mini statement, PIN change, etc.
5. With ATM being interoperable, customers can visit any bank ATM to withdraw cash, balance enquiry, PIN change, etc.

Types of ATM Deployments

Two other types of ATM deployments are common in our country, apart from common ATMs, viz. White Label ATMs and Brown Label ATMs.

Difference between White Label ATMs and Brown Label ATMs:

 About RuPay Network and RuPay Card

National Payments Corporation of India developed and launched the RuPay domestic card payment network in 2012.

RuPay network provides a financial benefit to both people and banks because the banks pay relatively low service charges compared to international counterparts.

Check Your Understanding

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