Advantages and types of Electronic Payment System
Key Takeaways
- Electronic Payment System refers to making online transactions without cash or cheques.
- The RBI regulates the electronic payment systems in India.
- Electronic Clearing services allow banks and non-banking institutions to debit or credit money instantly.
- NEFT, IMPS, and RTGS allow cashless fund transfers between bank accounts.
- E-payment systems are safe, speedy and cost-effective alternatives to paper-based payment systems.
The Reserve Bank of India keeps introducing modern and convenient methods of fund transfers. Today, electronic payment systems have become extremely common in India, paving the path for a cashless economy. This article explains the types and advantages of electronic payment systems. Read on to know more.
What is Electronic Payment System?
Electronic Payment System (e-Payment) is a type of payment conducted via electronic or online mediums. Online payment systems eliminate the need for cash or cheque payments. It is a unique payment method that allows you to conduct online transactions via digital wallets, bank cards and internet banking systems. The funds are directly debited from your bank account.
Types of Electronic Payment System
The RBI has introduced various cost-effective payment solutions as an alternative to cash transactions. The commonly used types of electronic payment systems include:
ECS Payments
For bulk and repetitive payments like salary credit, interest payment, dividend payments from companies, etc., the RBI introduced the Electronic Clearing Service (ECS) credit scheme in the 1990s. This system enables payers to credit a specific amount directly into the payees account on a particular date. ECS enables recurring payments to banks, Mutual Fund companies, service providers, utility companies, etc. The bank collects payment from your account and passes it on to the relevant companies.
Electronic Fund Transfers: NEFT, RTGS, and IMPS
National Electronic Fund Transfer (NEFT), Real-Time Gross Settlement (RTGS), and Immediate Payment Services (IMPS) are three modes of electronic fund transfers. With NEFT, you can transfer any amount of money, while the minimum transaction limit for RTGS is INR 2 lakhs. These transactions are cleared in half-hour batches, whereas IMPS transactions have a daily limit of INR 5 lakhs and are instantly cleared.
Clearing Corporations
Clearing Corporations settle trades in money markets, foreign exchange markets and government securities. Banks and other financial institutions set Clearing Corporation of India Limited (CCIL) as an industry-wide clearing company across India.
Pre-Paid Payment Systems
These include the purchase of goods and services using bank cards. You can use internet and mobile banking facilities, third party or bank digital and mobile wallets, and credit and debit cards to make payments on domestic and international e-commerce websites.
Advantages of Electronic Payment System
Having explained what is e-payment system, here are its primary advantages.
Lower costs
E-payments eliminate the costs associated with paper cheques, cash and postage. Payments conducted via electronic payment systems like credit card or debit card charges, processing fees, internet fees, etc., are lower.
Highly accessible
You only need an internet-enabled device like a smartphone or computer to access the various type of types of electronic payment systems from any place, any time.
Speedy transactions
You can buy the product within seconds, transfer money, pay your loan EMIs, get salary credits, and more with electronic payments.
Final Note
E payments have undoubtedly revolutionised the banking sector. Today, you can book all types of services and buy almost anything without exchanging a single rupee in cash. All transactions are quick and secure, making e payments the ideal money transaction method.
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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.
