are moving towards becoming a cashless society.

A cashless society is
the one which doesn’t use cash for any of its transaction instead all the
transactions are done digitally. There are various countries in the
world which have more than 50% of their transactions through
cashless methods.
In India 98% of the total transactions used to be done
through cash but after the Demonetization of the Government on Nov
8 2016, our country has also started getting steered towards a cashless
society. Due to the Demonetization act already existing mobile
payment applications came into the limelight like Paytm, Google pay,
Phone Pe etc.
WHAT IS DIGITAL TRANSACTION?
A digital transaction id process by which transactions
take place without the use of cash. A digital transaction involves the
collaboration of several parties including large financial firms and a
number of sectors within the economy. Examples include swiping a
debit card at a store, paying for a purchase online, or transferring
money from an app to your bank account. These kinds of transactions
have become increasingly prevalent and necessary as consumers
move from a cash-powered economy to a digital one.
TYPES OF DIGITAL TRANSACTION
Cashless India which is the flagship program of the Government of
India includes ten types payment methods. Here’s a look at them in
detail.

1. Unstructured Supplementary Service Data (USSD)

Unstructured Supplementary Service Data (USSD) has been introduced

to ensure the wider inclusion and reachability of digital payments. This
service allows users to transact through mobile without an internet
connection and by dialling *99# on any feature phone. The interactive
menu displayed on the phone offers interbank account to account
fund transfer, balance enquiry, mini statement and so on. It is
necessary for the user to link their phone to the bank account in order
to use this method. This direct-to-consumer service brings together
two diverse sectors – banks and telecom service providers with the
aim of making digital transactions available for everyone.
USSD payment processing is performed by sending a text message to a
service provider. When the service provider receives the text message,
it either charges the amount of the purchase to an online payment
system or adds the amount to the user’s phone bill.
2. Banking Cards
Banking cards are the credit, debit and prepaid cards being widely
used by customers for digital payments. Banking cards have an
authentication system in place through a pin and a one-time password
for secure transactions. RuPay, Visa and Mastercard are some of the
card payment networks that facilitate banking cards. Transacting
through a banking card requires a POS terminal or a payment
gateway. Apart from transacting, both online and offline, the cards can
be used at ATMs to withdraw cash as well. International cards allow
users to transact across the globe with multiple currencies. Customers
usually have a transaction limit on the cards which is based on credit
ratings determined by the banks.
Withdrawals or payments with bank cards will typically result in an
immediate corresponding change in the balance of the account on
which it is issued. This contrasts with credit cards, which issue
statements at monthly intervals with balances that must be paid by a
certain date. Many bank cards are associated with either Visa or
MasterCard. Although purchases are debited from deposit accounts,
purchases can be made as “credit” anywhere that accepts that Visa or
MasterCard.
3.Unified Payments Interface (UPI)
One of the most widely used digital payment methods in India, Unified
Payments Interface (UPI) brings together multiple bank accounts and
their features on a mobile application. Users can link their bank
accounts and transact using their preferred account through the app.
UPI has significantly simplified bank transfers when compared to other
popular options such as NEFT, RTGS or IMPS. Unified Payments
Interface used a virtual id as a unique identification to transfer and
receive money eliminating the need to recollect and enter bank details
each time. Unified Payments Interface (UPI) saw its highest
ever number of transactions in April 2022 at 5.58 billion, amounting to
Rs 9.83 trillion.
How Does UPI Work
The user will only have to use a virtual address, known as a Virtual
Payment Address (VPA) to carry out any transaction. UPI has been
developed by the National Payments Corporation of India (NPCI) and is
regulated by the Reserve Bank of India (RBI). UPI is slowly becoming
the most preferred form of digital payment. The below-mentioned
things are required to transfer funds via UPI:
 A smartphone
 An active bank account
 The mobile number must be active and linked to the bank account
 Internet connection
These features make UPI a very unique platform:

 There is just one singe mobile app to access various bank

accounts.
 It facilitates the Immediate transfer of money via mobile devices
24*7.
 The virtual address of the customer for any kind of 'Pull & Push'
offers security. The customer does not have to enter information
like card number, IFSC code or account number.
 With one click, there is a two-factor Authentication - Aligned with
the Regulatory guidelines, and also provides a seamless single
click payment.
 Negates the hassle of cash on delivery, or even going to an ATM.
 You can easily share your bills with friends.
 Over the Counter Payments, Barcode (Scan and Pay) based
payments, and Utility Bill Payments can be made.
 You can make merchant payment with a single app or in-app
payments.
 You can raise complaints directly from the mobile app.
 You can make donations, disbursements, and collections easily.

Performing A Digital Transaction with UPI

This is when you send money using a virtual address:

 You should log into the UPI application

 Once you login, you can select 'Send Money/Payment'
 Key in the beneficiary's/payee virtual id, account to be debited,
and amount
 You will see a confirmation on the screen
 Enter the UPI PIN
  You will get a message on the same.

4. Aadhaar Enabled Payment System (AEPS)

This method allows the digital transfer of money between two
accounts that have been linked to the respective Aadhar numbers. It is
a bank-led model and uses the vast reach of Aadhaar to facilitate
digital payments.
Users do not need to visit a bank for transfers and a business
correspondent usually assists in the transactions through Micro ATMs
via Adhar authentication.
The other services offered include balance enquiry, cash withdrawal
and cash deposit. The transaction limits vary and are defined by the
banks
How to use AEPS?
Step 1: Go to a micro ATM or banking correspondent
Step 2: Provide Aadhaar number and bank name
Step 3: Choose the type of transaction you want to make
Step 4: Provide verification through fingerprint/iris scan
Step 5: Collect your receipt
5. Prepaid card
A bank prepaid card is a debit card that is usually pre-loaded with a
specified amount for a single use and not linked to the bank checking
account. Unlike a credit card, the user can only spend what has been
added to the card in advance. When the balance has been used, the
card can be reloaded online, or at an ATM. The common use of a
prepaid card is for gifting, corporate rewards and so on. A user can
create a prepaid card through the bank’s website with a KYC-compliant
account.
Anyone who wants to stick to a strict budget, or who has had trouble
managing credit cards, could also consider using a prepaid debit card.

You can use a prepaid debit card for any transaction that you might
otherwise use a credit card or regular debit card for. In many
instances, the recipient of your payment may even be unaware that
the card is prepaid.

Some employers pay their workers with prepaid debit cards called
payroll cards (which can be useful if the person doesn't have a bank
account or direct deposit). Many government benefits are also
available via prepaid debit cards, including Social Security.
6. Mobile Wallets
Mobile wallets are the same as physical wallets except that cash is
carried digitally. Users can link their bank accounts to mobile wallets to
seamlessly add and use money from the wallet. Mobile wallets are
offered by banks as well as private companies. Paytm Wallet for
instance is widely used by customers across India for digital payments.
The mobile wallet is either a built-in feature or an app that can be
installed onto smartphones. A mobile wallet stores credit card, debit
card, coupon, or reward card information and connects directly to
bank accounts. When the app is installed and the user inputs their
payment information, the wallet stores this data by linking a personal
identification format such as a number, key, QR code, fingerprint, or
facial recognition for each stored card.
When a user makes a payment to a merchant, the mobile app uses a
technology called near-field communication (NFC) , which uses radio
frequencies to communicate between devices. NFC uses the personal
identification format created for the user to communicate the
payment information to the merchant’s Point of Service terminal. The
information transfer is usually triggered when the user waves or holds
an NFC-enabled mobile device over the store’s NFC reader .

7. POS (Point of Sale)

POS (Point of Sale) is primarily the location where sales are done. This
means a specified area or a checkout counter where billings are done.
However, tech advancements have introduced the POS machine which
can be used anywhere to make a payment with the help of a debit or
credit card.
POS machines can even debit money (up to INR 2000) without the
need for a pin through their contactless reader. POS speeds up the
transaction time, especially at places with long checkout queues. The
result is fast & efficient transactions and a seamless customer
experience.
The best example of a real-life POS transaction would be a super
market. For instance, while you’re at a retail chain, you pick up a few
goods and proceed to the checkout counter. At the checkout counter,
the supermarket staff scans your chosen products and creates a
receipt or a bill. Then, whenever you pay for those items with cash or a
card, a POS transaction occurs.
When a credit card or debit card is used to pay for something, a
conventional point-of-sale (POS) terminal first reads the magnetic
strip to check for sufficient funds to transfer to the merchant, then
makes the transfer. The sale transaction is recorded and a receipt is
printed or sent to the buyer via email or text .

8. Internet Banking
Internet banking has been one of the oldest methods around for
digital payments and involves transacting through the bank’s website.
Users can log in through their customer ids and access all their bank
details online.
NEFT, RTGS, and IMPS are the most well-known methods used while
sending and receiving money through internet banking. Transferring
funds through internet banking requires an account number, IFSC code
and other details of the receiver.
Internet banking is also a common method for online payments and is
enabled with the help of a payment gateway.

.
9. Micro ATM
Micro ATM is a device that is connected to banks and helps in online transactions at
places where banks and ATMs may not be available. It is usually handled by business
correspondents that are assigned by banks to conduct basic transactions.
The correspondents could be small shop owners who can parallelly manage banking
activities for their customers. They almost act like a bank and are supposed to give
cash when withdrawn and deposit it when handed over.
Micro ATMs can be used for financial activities through bank accounts that must be
necessarily linked to the Aadhaar number. The services include withdrawal, deposit,
enquiries and transfer of money.
10. Mobile Banking
Mobile banking is more of an extension of internet banking where users can transact
through the bank application by downloading it on their mobile phones.
Considering the increasing penetration of mobile devices in India, mobile banking is a
more accessible and convenient method for users than internet banking.
Mobile banking also offers digital payment methods such as IMPS, NEFT, and RTGS
for transactions and transfers of money.