PAYMENT Payments are an indispensable part of our daily transactions, be it a consumer to a business, a business to a consumer or a business to a business.

Payments raise the GDP of a country thus it is mandatory that the payment systems of the country are safe, secure, sound, efficient, accessible and authorize, as states the mission statement of the Reserve Bank of Indias publication on Payment Systems in India (200912). The Reserve Bank of India continually strives towards ensuring the smooth progress of the payments system. In India it is the BPSS (Board for Regulation of Payment and Settlement Systems) which is in charge of regulating these systems. Payment systems in any country are the most essential part of the economic system of that country. Efficiency in these is required to guarantee the timely completion of all transactions. As the payment system is one of the most important components of the financial system, innovative ways of making payments which are less hasslesome are being focused upon. The BPSS is trying to effect a change in the mode of payments in India, from paper to electronic. Since electronic means are both safer and more efficient efforts are continuously being made to change the mindset of people and make them shift to electronic-payments. An efficient payment system forms the backbone of economic well-being of a nation

Contents
Types of e-payments Electronic Clearing Service (ECS Credit) Electronic Clearing Services (ECS Debit) National Electronic Funds Transfer (NEFT) Credit cards and Debit cards

Electronic payment systems in India

Due to the efforts of the RBI and the BPSS now over 75% of all transactions are made in the electronic mode, including both large-value and retail payments. Out of this 75%, 98% come from the RTGS (large-value payments) whereas a meagre 2% come from retail payments. This means consumers have not yet accepted this as a regular means of paying their bills and still prefer conventional methods. Retail payments if made via electronic modes are done by ECS (debit and credit), EFT and card payments.

Types of e-payments
Electronic Clearing Service (ECS Credit)
Known as Credit-push facility or one-to-many facility this method is used mainly for largevalue or bulk payments where the receivers account is credited with the payment from the institution making the payment. Such payments are made on a timely-basis like a year, half a year, etc. and used to pay salaries, dividends or commissions. Over time it has become one of the most convenient methods of making large payments.

Electronic Clearing Services (ECS Debit)

Known as many-to-one or debit-pull facility this method is used mainly for small value payments from consumers/ individuals to big organizations or companies. It eliminates the need for paper and instead makes the payment through banks/corporates or government departments. It facilitates individual payments like telephone bills, electricity bills, online and card payments and insurance payments. Though easy this method lacks popularity because of lack of consumer awareness.

National Electronic Funds Transfer (NEFT)

NEFT is a facility provided to bank customers to enable them to transfer funds easily and securely on a one-to-one basis. It is done via electronic messages. In order to speed up the transactions there are up to 6 transactions in one day. Even though it is not on real time basis like RTGS (Real Time Gross Settlement), NEFT facilities are available in 30.000 bank branches all over the country and work on a batch mode. NEFT has gained popularity due to it saving on time and the ease with which the transactions can be concluded. This reflects from the fact that 42% of all electronic transactions in the 2008 financial year were NEFT transactions.

Credit cards and Debit cards

As mentioned above India is one of the fastest growing countries in the plastic money segment. Already there are 130 million cards in circulation, which is likely to increase at a very fast pace due to rampant consumerism. Indias card market has been recording a growth rate of 30% in the last 5 years. Card payments form an integral part of e-payments in India because customers make many payments on their card-paying their bills, transferring funds and shopping. Ever since Debit cards entered India, in 1998 they have been growing in number and today they consist of nearly 3/4th of the total number of cards in circulation. Credit cards have shown a relatively slower growth even though they entered the market one decade before debit cards. Only in the last 5 years has there been an impressive growth in the number of credit cards- by 74.3% between 2004 and 2008. It is expected to grow at a rate of about 60% considering levels of employment and disposable income. Majority of credit card purchases come from expenses on jewellery, dining and shopping. Another recent innovation in the field of plastic money is co branded credit cards, which combine many services into one card-where banks and other retail stores, airlines, telecom companies enter into business partnerships. This increases the utility of these cards and hence they are used not only in ATMs but also at POS ( Point of Sale) terminals and while making payments on the net. The internet as a channel of payment is one of the most popular especially among the youth. Debit and credit payments are made by customers on various banks websites for small purchases,(retail payments) and retail transfers( ATM transfers).