Global opportunities for Chartered Accountants in digital payment

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Digital Payment Systems: An introduction

Digital Payment system is a process of making payment via digital or online modes. Here no physical exchange of money involved. It is also known as cashless transactions. Now all over across the world, we can make payment with the use of online or digital payment system. It makes the business transactions easiest one. We can make the payment at any place of the world. With digital payment, we can send and receive funds from anywhere in the world at the click of a button.

From barter system to Unified Payments Interface (UPI), payment systems in India have come a long way. The electronic payment system is considered as the backbone of e-commerce. This is a part of digital economy, where the currencies are exchanged digitally. When we make payment via digital modes, either from digital platforms or on physical premises, it qualifies as a digital payment. The terms "money" and "currency" are used interchangeably.

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User of Internet and other social media platforms-

??Current population of India-138 crores (2020)

??Over 290 million Facebook users in India?

??There were?65 090 000?Linkedin users in India in January 2020, which accounted for 4.6% of its entire population.?And 180 million users in the United States, as of October 2021

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Defining the terms

Meaning of virtual currency-It is a currency available in electronic form. As per Indian Revenue service, Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value.

Digital currency- Digital currency is?a digital format of fiat money.

Crypto currency- cryptocurrencies are built on the blockchain. Cryptocurrencies are not under the control of any single entity.

Origin of Internet

The concept of internet was brought up by USA in 1950. Internet was started in India by VSNL Limited?in the year 1995 for the first time with an average speed of 9.6 Kbit/s . The speed later increased to 33.4kbit/s, with 14 lakh Indian users.

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History of payment system

??Barter system- Method of exchange

·????????exchange of goods and services without the use of money.?

·????????Introduced by Mesopotamia tribes, bartering was adopted by Phoenicians

·????????Started in 6000 BC.

·????????Firstly, farmer used these techniques to exchange wheat and other goods in exchange of of shoes from a shoemaker

??Money system- Coins-In 600 B.C., Lydia's King Alyattes imprinted the first official currency. These coins were made from electrum, a mixture of silver and gold that occurs naturally, and the coins were stamped with pictures that acted as?denominations.?

·????????The first Indian coins were imprinted in the 6th Century BC?by the Mahajanapadas (republic kingdoms) of ancient India. It was marked as a punch which was called as called Puranas, Karshapanas or Pana.?It was made up of silver and bear symbols like-

·????????Transition to paper money- In 770 B.C. it was the Chinese?who devised the system of paper money for the first time.?

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Ancient India Coinage

??Punch Marked Coins

??Dynastic Coins- Indo-Greeks, the Saka-Pahlavas and the Kushans.?2nd century BC and 2nd century AD, Kushan coins?

??Satavahana- Andhras (270 BC to 30 BC), silver coins of the Satavahanas carried portraits and bilingual legends,

??Western Kshatrapa- 1stand 4th Century AD- copper coins are the 'bull and hill' and the 'elephant and hill' types.

??Gupta coinage (4th-6th centuries AD)

??Post-Gupta coinage (6th-12th centuries AD)

??South Indian Coinage- symbols-dynastic crests such as the boar (Chalukya), bull (Pallava), tiger (Chola), fish (Pandya and Alupas), bow and arrow (Cheras) and lion (Hoysala)?

Before Independence

??Foreign currency came to India when East India Company was started in India

After Independence

??The "Anna Series"?was introduced on 15 August 1950. This was the first coinage of the Republic of India. The King's image was replaced by Ashoka's Lion Capital.

??These included 1/2-rupee, 1/4 rupee, 2 anna, 1 anna, 1/2 anna & 1 pice coins. one rupee was divided into 16 annas or 64 pice, with each anna equal to 4 pice.

??In 1957, India shifted to the decimal system- New Paisa. "naya" was dropped in 1964 and a new denomination, the 3 paisa, was introduced into circulation.?A 20 paisa coin was minted in 1968

??In 2005, the?10-rupee coin?was developed for the first time.?

??On 30 June 2011, all coins in denominations of 25 paisa and below were officially demonetised.

??Present existing coins- One Rupee, Two Rupees, Five Rupees, Ten Rupees and Twenty Rupees.?

Paper money-

??The first paper currency note, i.e., the?10 rupees'?note was introduced by the Government of India in the year 1861.?

??British India Issues commence with the Paper Currency Act of 1861 which gave the Government the monopoly of note issue in India

??The Reserve Bank of India was formally inaugurated on April 1, 1935 with its Central Office at Calcutta.

??First Five Rupee note was issued bearing the portrait of George VI in 1938.

??The George VI series continued till 1947 and thereafter as a frozen series till 1950 when post-independence notes were issued.

Banking cards

??Debit cards were introduced in?1966?

??Credit card?was introduced by the Central bank of India in 1980 in association with Visa and Master Card.?

??Smart payment cards were introduced to the banking sector in?1979, and came into wider use in the mid-1980s.

??In 2004, the?Payment Card Industry Security Standards Council?was created to make sure that businesses comply with security requirements. This organization develops and implements security standards for account data protection.

?Electronic Payments/ Mobile Payments

·????????It was started in 21st Century

·????????Mobile payments and virtual currency.

·????????India’s first-ever payment aggregator “BILLDESK” launched its operations in India, in 2000.?

·????????Mobile banking was started in 2007

·????????Bitcoin , released in 2009 by the pseudonymous Satoshi Nakamoto

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Various types and methods of digital payments-

1.?????Banking Cards

2.?????Unstructured Supplementary Service Data (USSD)-

3.?????Aadhaar Enabled Payment System (AEPS)-

4.?????Unified Payments Interface (UPI)

5.?????Mobile Wallets

6.?????Bank Prepaid Cards

7.?????Point of Sale (PoS) Terminals

8.?????Internet Banking

9.?????Mobile Banking

10.?Micro ATMs

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1.?????Banking cards- It means the It includes-

a)?????Debit card,

b)?????credit card,

c)?????prepaid – offers and

d)?????electronic card

a)?????Debit card- It is the card which is used to deduct amount or to make payment from the customer’s account. Money is taken out by this card which is already deposited in the account.

?????????????????????Types of debit card-

??Visa Debit Card

??Visa Electron Debit Card

??Mastercard Debit Card

??Maestro Debit Card

??RuPay Debit Card- The National Payments Corporation of India (NPCI)

b)????Credit card- It is card which allows the user to make payment or withdraw amount by borrowings from the bank up to a certain limit.

c)?????Prepaid offers- It is not linked with the bank accounts. It is the card in which money is loaded to the card. That amount can be invested by the used for various purposes within the time limit.

d)????Electronic card-It is mainly used for ecommerce transactions. It is also known as virtual card. This card can be used for limited time. Upto its validity. Various banks issue such types of cards like SBI.

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2.?????Aadhaar Enabled Payment System-

??This system is developed by NPCI i.e. National Payments Corporation of India.

??to carry out financial transactions on a Micro-ATM by furnishing just their Aadhaar number and verifying it with the help of their fingerprint/ scan.

??Service Available from no. of operators: 118 banks

??Banking Services Offered by AePS

·????????Cash Deposit

·????????Cash Withdrawal

·????????Balance Enquiry

·????????Mini Statement

·????????Aadhaar to Aadhaar Fund Transfer

·????????Authentication

·????????BHIM Aadhaar Pay

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3.?????Unified Payments Interface (UPI)

·????????money will be directly debited from the customer's bank account.

·????????“Peer to Peer”

·????????immediate money transfer?

·????????2 Factor Authentication

·????????QR Code

UPI Payment App

1.?????PhonePe-

2.?????Paytm

3.?????BHIM app

4.?????MobiKwik

5.?????Google Tez

6.?????Uber

7.?????Chillr

8.?????Paytm Payments Bank

9.?????SBI Pay

10.?iMobile

11.?Axis Pay

12.?BOB UPI

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5.?????Mobile Wallets

It is type of virtual or digital wallet. It stores various information such as debit and credit card numbers. It allows the user to make electronic transactions such as purchase of goods, electricity payment, recharge of mobile phones etc. An individual's account is required to be linked to the?digital wallet?to load money in it.

Mobile wallet apps-

1.?????Paytm

2.?????Freecharge

3.?????Google Pay

4.?????Apple Pay

5.?????Amazon Pay

6.?????Mobikwik

7.?????mRuppee

8.?????Airtel Money

9.?????Jio Money

10.?SBI Buddy

11.?itz Cash

12.?Citrus Pay,

13.?Vodafone M-Pesa

14.?Axis Bank Lime

15.?ICICI Pockets

16.?SpeedPay

Services Offered:

·????????Balance Enquiry

·????????Passbook/ Transaction history

·????????Add money

·????????Bank A/c

·????????All Cards

·????????Cash-In

·????????Accept Money

·????????Pay money

·????????Another wallet (mobile no.) with same provider

·????????Pay merchant

·????????Bar Code reader

·????????Manage Profile

·????????Notifications

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5.?????Bank Prepaid cards

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List of banks permitted by RBI to issue pre-paid cards in India as on April 05, 2021

1 Airtel Payments Bank Limited

2 American Express Banking Corporation

3 A. P. Mahesh Co-operative Urban Bank Limited

4 Au Small Finance Bank Limited

?5 Axis Bank Limited

6 Bandhan Bank Limited

7 Bank of Baroda

8 Bank of India

9 Bank of Maharashtra

10 Barclays Bank PLC

11 Canara Bank

?12 Central Bank of India

13 Citi Bank N.A.

14 City Union Bank Limited

15 DBS Bank India Limited

16 DCB Bank Limited

17 Equitas Small Finance Bank Limited

18 ESAF Small Finance Bank Limited 1

9 Fino Payments Bank Limited

20 First Rand Bank

21 HDFC Bank Limited

22 ICICI Bank Limited

23 IDBI Bank Limited

24 IDFC FIRST Bank Limited

25 Indian Bank

26 Indian Overseas Bank

27 IndusInd Bank Limited

28 Jana Small Finance Bank Limited

29 Jio Payments Bank Limited

30 Karnataka Bank Limited

31 Karur Vysya Bank Limited

32 Kerala Gramin Bank

33 Kotak Mahindra Bank Limited

34 Lakshmi Vilas Bank Limited

35 NSDL Payments Bank Limited

36 Paytm Payments Bank Limited

37 Pragathi Krishna Gramin Bank

38 Punjab National Bank

39 Punjab & Sind Bank

40 SBM BANK (INDIA) LTD.

41 South Indian Bank Limited

42 Standard Chartered Bank

43 State Bank of India

44 Tamilnadu Mercantile Bank Limited

45 The Ahmedabad Mercantile Co-operative Bank Limited

46 The Catholic Syrian Bank Limited

47 The Dhanlaxmi Bank Limited

48 The Federal Bank Limited

49 The Gujarat State Co-operative Bank Limited

50 The New India Co-operative Bank Limited

51 The Rajasthan State Co-operative Bank Ltd.

52 TJSB Sahakari Bank Limited

53 RBL Bank Limited

54 The Saraswat Co-operative Bank Limited

55 UCO Bank

?56 Union Bank of India

57 Yes Bank Limited

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6.?????Point of Sale (PoS) Terminals

It means the payment made by the customer at the time of purchasing at the counter via electronic means. It involves processing of card payments at retail locations.

7.?????Internet Banking- is?an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the financial institution's website. It is also known as online banking or e-banking.

8.?????Mobile Banking- It can be done by installing the app of the financial institution in mobile phones. It involves the act of making financial transactions on a mobile device?(cell phone, tablet, etc.).

9.?????Micro ATMs-It is also known as mini-ATM. are?portable devices that allow banking transactions including cash deposit, withdrawal and fund transfer using debit?or RuPay cards.?It is the used by the business merchants to provide banking services to its customer. This machine contains facilities like card swiping and fingerprint scanner.

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Establishment of institutions

??Institute for Development and Research in Banking Technology (IDRBT)- https://idrbt.ac.in/- It was established in March 1996 as an Autonomous Centre for Development and Research in Banking Technology.

??National Payments Corporation of India (NPCI)

??Clearing Corporation of India Limited (CCIL)

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National Payments Corporation of India-NPCI- https://www.npci.org.in/

It is an initiative taken by the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) to set up an organization to operate payment and settlement system in India. This organization is established under the provisions of the Payment and Settlement Systems Act, 2007.?It is Non-Profit organization established under Section 8 of the Companies Act 2013.

Payment system developed by NPCI

??RuPay

??Immediate Payment Service (IMPS)

??National Automated Clearing House?(NACH)

??Aadhaar Payment Bridge System (ABPS)

??Aadhaar enabled Payment System (AePS)

??National Financial Switch (NFS)?

??Unified Payments Interface (UPI)

??Bharat Bill Payment System

Payment gateways in India

???????????????????i.Citrus Pay Payment Gateway- https://consumers.citruspay.com/

?????????????????ii.CCAvenue Payment Gateway- https://www.ccavenue.com/

???????????????iii.PayUBiz India Payment Gateway- https://www.payubiz.in/

???????????????iv.Direcpay Payment Gateway- https://www.direcpay.com/

?????????????????v.Zaakpay Payment Gateway- https://zaakpay.com/

???????????????vi.Instamojo Payment Gateway- https://www.instamojo.com/

?????????????vii.Bill Desk- https://www.billdesk.com/

???????????viii.Atom Paynetz Payment Gateway- https://www.atomtech.in/

???????????????ix.PayUMoney- https://payu.in/

?????????????????x.ePaisa- https://www.epaisa.com/

???????????????xi.airpay- https://sanctum.airpay.co.in/

?????????????xii.JusPay- https://juspay.in/

???????????xiii.Transecute- https://www.transecute.com/

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Authentication for digital payment

1.?????Multifactor authentication-It includes-

??Password-based authentication,

??3D secure,

??Card Verification Value (CVV),

??address Verification Systems (AVS),

??Age Verification,

??time-based one-time password (TOTP) method,

2.?????Two-factor authentication-two-step verification or dual-factor authentication.

Example-withdrawing of money from an ATM; It requires to the user only the correct combination of a bank card and a PIN in order to carry out the transaction.

Like Google- 2 step verification, Amazon Two-Step Verification, Apple Two-Factor Authentication

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Who acts as regulator and supervisor of payments and settlement system in country?

Payment and settlement systems in India are used for financial transactions. They are covered by the Payment and Settlement Systems Act, 2007 legislated in December 2007 and regulated by?the Reserve Bank of India and the Board for Regulation and Supervision?of Payment and Settlement Systems.

Payment and settlement systems

In India, the payment and settlement systems are regulated by the Payment and Settlement Systems Act, 2007 which was legislated in December 2007. Also, the Payment and Settlement System Regulations, 2008 framed thereunder came into effect from August 12, 2008. The Reserve Bank of India is the regulatory authority who operates payment and settlement system in India.

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The Board for Regulation and Supervision of Payment and Settlement Systems (BPSS),?a sub-committee of the Central Board of the Reserve Bank of India?is the highest policy making body on payment systems in the country.

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Who heads the board for payment and settlement system?

The Board for Payment and Settlement Systems is chaired by?the Governor of RBI?and its members are all the four Deputy Governors and two Non- Official Directors of the Central Board.

The Payment and settlement System Act, 2007-Legislated on 20th December, 2007

This act provides for the regulation and supervision of payment systems in India. It was legislated to designate RBI as the authority for the payment and settlement system in India. It contains 8 Chapters, 38 Sections.

Various definitions under the Payment and settlement System Act, 2007

“payment instruction” means any instrument, authorisation or order in any form, including electronic means, to effect a payment,

(i) by a person to a system participant; or

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(ii) by a system participant to another system participant

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“payment obligation” means an indebtedness that is owned by one system participant to another system participant as a result of clearing or settlement of one or more payment instructions relating to funds, securities or foreign exchange or derivatives or other transactions;

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“payment system” means a system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them, but does not include a stock exchange;

“settlement” means settlement of payment instructions and includes the settlement of securities, foreign exchange or derivatives or other transactions which involve payment obligations.

“system participant” means a bank or any other person participating in a payment system and includes the system provider

“system provider” means a person who operates an authorised payment system

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Various Powers of RBI-

1.?????Power to determine standards

2.?????Power to call for returns, documents or other information

3.?????Access to information

4.?????Power to enter any premise where a payment system is being operated and to inspect any equipment, including any computer system or other documents situated at such premises.

5.?????Power to carry out audit and inspection

6.?????Power to issue directions

7.?????Power to give general directions

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RBI directions or framework for digital payment-

??RBI Framework for Facilitating Small Value Digital Payments in Offline Mode, January 03, 2022

??The Reserve Bank of India (Digital Payment Security Controls) directions, 2021, February 18, 2021

??RBI Guidelines for the issue of Smart / Debit Cards by banks, November 12,1999

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Committee Report on Deepening of Digital Payments

??Constituted by RBI

??High Level Committee- Chairman- Nandan Nilekani

??Submitted report on - May 17, 2019

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The Committee in its report included the following:

(i)????????????????reviewing the existing status of digital payments in India,

(ii)?????????????identifying gaps and recommending measures to bridge them,

(iii)???????????assessing the current levels of digital payments in financial inclusion and

(iv)????????????suggesting a medium-term strategy for deepening of digital payments.

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The Unique Identification Authority of India (UIDAI)- https://uidai.gov.in/

It?is a government agency established under the provisions of the?Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (“Aadhaar Act 2016”)?on 12 July 2016 by the Government of India, under the Ministry of Electronics and Information Technology (MeitY).

UIDAI is responsible for Aadhaar enrolment and authentication, including operation and management of all stages of Aadhaar life cycle, developing the policy, procedure, and system for issuing Aadhaar numbers to individuals and perform authentication and?the security?of identity information and authentication records of individuals.

Total Aadhaar issued-131.68 crore?Aadhaar numbers to the residents of India.

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What services Chartered Accountants can render in Digital economy?

1.?????Digital Transformation Consultancy services

2.?????Startup ecosystem

3.?????Create a website

4.?????Fintech services

5.?????Set up your own blog or contribute blog posts on various CA platforms for digital payment

6.?????Conferences and Public Speaking Opportunities in virtual mode

7.?????Become An Affiliate of Network of Chartered Accountants

8.?????Create Profiles on social media

9.?????Join Groups on Various Social Media Platforms

10. Become a payment aggregator

11. Setting up of payment gateways

12. Audit of payment aggregator

13. Data analysis

14. Digital accounting

15. management of digital payment

16. Reporting

17. Online accounting software

“Ability is what we are capable of doing. Motivation determines what we do. Attitude determines how well we do it.”

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Websites for references

https://data.worldbank.org/

https://www.weforum.org/

https://cashlessindia.gov.in/

https://uidai.gov.in/

https://www.npci.org.in/

https://dot.gov.in/