Understanding Digital Payments

What you need to know about the modes and methods available.

Types of Cards

There are three types of cards that banks will issue to their account holders – credit, debit, and prepaid cards. Cards can be given a PIN for increased security. If a bank assigns a PIN to a card, it will issue that pin separately.

Credit cards allow you to borrow money from your bank to make your purchases. As long as you pay back the money you borrowed within the grace period from the date of your purchase, which can be up to 45 days, you don’t have to pay interest.

Debit cards are linked to your bank account. They can be used at ATMs and microATMs. They can also be used to pay at shops. You can even use your debit card for online shopping and link it to an e-wallet.

Prepaid cards are pre-loaded from your bank account and are the equivalent to cash. With a limited amount of transaction they are safe to use at any POS or ATM. Prepaid cards can also be recharged several times, just like a mobile recharge.


HDFC PayZapp, SBI Buddy, and ICICI Pockets are examples of this electronic payment system. They all require an individual bank account to be linked. They also can be used with existing debit cards and credit cards. There are consumer wallet limits – Rs. 20,000/month and Rs. 1 lakh/month (with KYC).

Point of Sale

There are several types of POS that are available through banks and third party companies.

Physical POS
A card swiping machine. The connectivity choices for this POS are PSTN (Public Switched Telephone Network) with a landline and GRPS.

A consumer grade handheld device (smart phone or tablet) with wireless connectivity that is used for the acceptance of payment cards. This solution comprises of card reading functionality (contact and/or contactless) and a mobile app supporting the payment functionality.

A virtual e-payment gateway where no POS machine is required. A QR code is used
for payment to the bank account of the merchant. With V-POS there is complete
privacy of the merchant bank account.

USSD requires a bank account and a mobile phone linked to the account. MMID and MPIN are issued upon registration. Additionally, UPI requires a smartphone with data. This is set up through a virtual payment address based on a unique ID. Following registration, a simple process is followed.