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LET’S TALK ABOUT DIGITAL PAYMENTS
35

Digital payments

Jan 09, 2017

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Economy & Finance

Umashanker Sahu
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Page 1: Digital payments

LET’S TALK ABOUT

D I G I TA L PAY M E N T S

Page 2: Digital payments

Digital Payment Companies In India

1.1.1 Concept – Meaning & Definition

1.1.2 Overview of Payment Systems

1.1.3 Digital Payment Forecasting

1.1.4 Payment Gateways

Page 3: Digital payments

Digital Payment Companies

1.1 Introduction & Overview of Payment Systems

1.2 Prepaid Payment Instruments [PPI]

1.3 Who can Issue PPI?

1.4 Mode of Payment

1.5 Anti Money Laundering [AML]

1.6 Key Discussions

Session - I Road Map…

Page 4: Digital payments

1.1.1 Concept

“Digital payments are not one instrument but rather an umbrella term applied to a range of different instruments used in different ways.”

Meaning & Definition:

“I love you not for what you are but for what I am when I am with you”

-- Umashanker Sahu

Page 5: Digital payments

1.1.2 Overview of Payment System

Country’s Cashless Journey 2006-2011- Shift of Non Cash

Payments 2013 – Master Card launched 2014 – Online payments rapid

Growth 2014 – Adaption of Mobile payment 2015 – 200% increase in Mobile

Payment from 2011 E- Commerce

Consumer to Business (C2B) Business to Consumer(B2C) Manufacturer Wholesaler

Page 6: Digital payments

1.1.3 Forecasting

'Indian digital payments market to reach $500 bn by 2020'

Page 7: Digital payments

1.1.4 Payment gateway market

HOW PAYMENT GATEWAYS WORK

 Software and servers that transmit Transaction information to Acquiring Banks and responses from Issuing Banks (such as whether a transaction is approved or declined).

Page 8: Digital payments

1.1.4 Payment gateway market

Payment Gateway Players Financial Institutions/Banks

• ICICI• CITI• HDFC• AXIS etc.

Third Party Vendors

• CC Avenue• Bill Desk• PayU• PayPal etc.

Page 9: Digital payments

1.2 Prepaid Payment Instruments [PPI]

Definition: “Payment instruments that facilitate purchase of goods

and services, including funds transfer, against the value stored on such instruments. ”

---- RBI under Payment & Settlement Systems Act 2007

Meaning & Definition:

“Mode of cashless fund transfer or transaction using cards or mobile phones”

-Umashanker Sahu

Page 10: Digital payments

1.2 PPI Exists??

Page 11: Digital payments

1.2 Classification of PPIClosed System Payme

nt Instruments

• Issued by an entity for facilitating the purchase of goods and services

• Do not permit cash withdrawal

• Usage - Web portals for online purchases /shopping - Make my Trip, Flipkart, Jabong etc. Semi-

Closed Payment

Instruments

• Facilitates the purchase of goods and services at identified merchant locations

• Do not permit cash withdrawal

• Limit – Rs. 20,000 with minimum details

• E.g. E Wallets/Digital Wallets Open

System

Payment

Instruments

• Facilitates the purchase of goods and services at POS terminal.

• Permit Cash withdrawal upto Rs.1000 at any point of time.

• Eg. Web portals for online purchases /shopping -

Closed System Payment Instruments

Semi-Closed System Payment Instruments

Open System Payment Instruments

Page 12: Digital payments

1.2 Classification of PPI

Closed System Payment Instruments

Semi-Closed System Payment Instruments

Open System Payment Instruments

Virtual Cards/Digital Wallets/E-Wallets

General Purpose Debit Cards

Gift Cards

Page 13: Digital payments

1.3 Who can issue PPI in India?

Companies minimum paid up capital of Rs. 5 crore and +ve Net worth of Rs. 1 crore

Mobile based pre-paid payment instruments (mobile wallets & mobile accounts)

NBFC - closed and semi-closed system payment instruments, including mobile phone based pre-paid payment instruments

Certificates of Authorization issued by Reserve Bank of India under the Payment and Settlement Systems Act, 2007 for Setting up and Operating Payment System in India

Page 14: Digital payments

1.4 Mode of Payment

1.4.1 Bank Cards 1.4.2 USSD Mobile Banking 1.4.3 Aadhar enabled payment system [AEPS]1.4.4 United Payments Interface [UPI] 1.4.5 Point of Sale (POS) & Cards1.4.6 Mobile POS1.4.7 V- POS1.4.8 Best Practices

Page 15: Digital payments

1.4.1 Bank Cards

How to issue Approach nearest bank branch Multiple cards from one account PIN issued by bank separately

Activate your Card At your Bank’s ATM by even balance

checking At your bank branch by any

transaction

Page 16: Digital payments

1.4.1 Bank Cards – Types & Usage

PREPAID CARDS

Pre-loaded from your bank account

Safe to use, limited

amount of transaction

Can be recharged like mobile recharge like Gift Card

DEBIT CARDS

Linked to your bank account

Used to pay at shops, ATMs, wallets, Micro ATMs, online shopping Etc.

Page 17: Digital payments

1.4.2 USSD – Mobile bankingEnables Customer to send money, check account balance, mini statement and more without internet connectivity.

Non-internet Banking - USSD - *99#

Registrations

Get Mobile Money Identifier (MMID)& Mobile Pin [MPIN]

Link mobile number with Bank Account

Account in a bank or Any mobile phone on GSM network

Page 18: Digital payments

1.4.2 Transaction FlowTransfer Funds to another Bank Account

Dial 99# from your phone

Page 19: Digital payments

1.4.3 Aadhar enabled payment system [AEPS]

AEPS allows bank-to-bank transaction at PoS (MicroATM) with the help of BC.

Only Aadhar needed

Aadhar enabled Services

Balance EnquiryCash WithdrawalAadhaar to Aadhaar Funds Transfer

Page 20: Digital payments

1.4.3 Transaction Flow

GO TO A MICROATM

OR BANKING CORRESPOND

ENT

PROVIDE YOUR BANK NAME AND AADHAAR

CHOOSE WHICH

TRANSACTION TO DO

PROVIDE FINGER PRINT ON SCANNER

ON SUCCESSFUL TRANSACTIO

N TAKE THE PRINT SLIP

PROCESS COMPLETED

Page 21: Digital payments

1.4.4 Unified Payment Interface [UPI]

A system that powers multiple bank accounts into a single mobile application like an email ID for your money.

Registration Requirements

Smartphone with internet facility

Bank Account details (only for registration)

CUPI, UCO UPI, Union Bank UPI,AVAILABLE APPS (28 BANK APPS)

like SBI app, PNB UPI, UPI Collect (ICICI) etc.

Page 22: Digital payments

1.4.4 Registration Process

DOWNLOAD ANY BANK’S APP

CHOOSE YOUR UNIQUE ID AS

VIRTUAL PAYMENT ADDRESS (VPA)

SELECT YOURBANK

GIVE ACCOUNT DETAILS FOR FIRST

TIME

SET M-PIN FOR VALIDATING

TRANSACTIONS

REGISTRATIO N COMPLETED

Page 23: Digital payments

1.4.4 Registering on UPI

Page 24: Digital payments

1.4.4 Sending Money on UPI

Page 25: Digital payments

1.4.5 Point of Sale (POS) & Types

An electronic device used to process card payments at retail locations.

PHYSICAL POS MOBILE POS VIRTUAL POS

Page 26: Digital payments

1.4.5 Physical POSThe physical location at which goods are sold to customers.

1. Swipe a Debit/Credit Card on

the POS Machine.

2. Enter Amount to be Paid and PIN 3. Generate Receipt

Page 27: Digital payments

1.4.6 Mobile POS

A Smartphone, tablet or dedicated wireless device or electronic point of sale terminal.

Page 28: Digital payments

1.4.7 Virtual- POS

A web or windows application that can be used by card-accepting merchants to manually authorize card transactions.

No POS machine required QR code used for payment to bank account of merchant Complete privacy of merchant bank account

Page 29: Digital payments

1.4.8 Best Practices

Register your mobile number at bank for regular information by SMS for every transaction

Never share your PIN to anyone Transact at only trusted merchants While at ATM, ensure no one is looking over your

shoulders

Page 30: Digital payments

1.5 Anti Money Laundering [AML]

1.5.1 Meaning, Definition & Concepts

1.5.2 ML Activities

1.5.3 Stags of ML

1.5.4 AML Flow

1.5.5 Illustration Video

Page 31: Digital payments

1.5.1 Meaning, Definition & Concepts

Section 3 of PMLA 2005, describes the offence of ML. Section 3 reads as under: “Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering.”

Money Laundering (ML) is the processing of criminal proceeds in order to disguise their illegal

origin.

Page 32: Digital payments

1.5.2 Money Laundering Activities

Account activities not consistent with the customer’s business or normal transaction profile of the customer.

Transactions which attempts to avoid reporting/record-keeping requirements.

Unusual activities. Transaction or account activities pertaining to

customer who provides insufficient or suspicious information or is reluctant to provide requisite information.

Suspicious fund transfer activities.

Page 33: Digital payments

1.5.3 Stages of ML

•Physical Movement of cash through banking channel.

PLACEMENT STAGE•Conducting Multiple complex

financial Transactions to eliminates the audit trail.

LAYERING STAGE

•Integrate the illicit funds into the Economy

•E.g. Purchase of real estate, Jewellery etc.

INTEGRATION STAGE

Page 34: Digital payments

1.5.4 Money Laundering Flow

Page 35: Digital payments

Happy Digitalization

Thank You