What are Digital Payments and how do they work? (2024)

FAQs

What are Digital Payments and how do they work? ›

Digital payments include any method of transferring money or digital currency between two parties using digital payment technologies. This commonly includes several types of digital payments: Online electronic payment systems: Electronic bank transfers, eChecks, and wire transfers.

Defining digital payments

This definition may include payments made with bank transfers, mobile money, QR codes, and payment instruments such as credit, debit, and prepaid cards.

Such a payment, sometimes also called an electronic payment (e-payment), is the transfer of value from one payment account to another where both the payer and the payee use a digital device such as a mobile phone, computer, or a credit, debit, or prepaid card.

Digital payments contribute significantly to cost reduction for businesses. Traditional payment methods often incur hefty transaction fees, especially for cross-border transactions. In contrast, digital payments are generally more cost-effective, with lower transaction fees and reduced operational costs.

We asked U.S. consumers about "Biggest e-commerce payment brands" and found that "PayPal" takes the top spot, while "Skrill" is at the other end of the ranking. Find this and more survey data on most used online payments by brand in our Consumer Insights tool.

One of the biggest drawbacks is the risk of theft or loss. Cash can be easily stolen or misplaced, while checks can be lost in the mail or stolen from a mailbox. In contrast, digital payments are more secure and can be easily tracked and monitored, reducing the risk of fraud or theft.

Are digital payments more secure than offline payments? Digital payments are typically more secure than offline payments for a variety of practical reasons. First, paying for items using physical cash or cards requires that customers carry those items around with them, possibly exposing themselves to robbery.

Use your digital wallet for online and in person payments, sending money to others, and more. Online look out for your wallet's symbol at checkout - and in person just tap to pay wherever you see contactless payments supported. You can then authorise the transaction with a PIN or biometric verification for security.

Which is a risk when using digital payment? ›

Security Risks: Digital payments carry significant security risks. Cybercriminals exploit vulnerabilities in payment systems to steal personal and financial data, resulting in identity theft, fraud, and unauthorized transactions.

Authenticate identity: A whopping 61% of breaches are caused by stolen or compromised credentials. Using advanced authentication to ensure the user of a mobile/digital wallet (and the digital card it holds) is whom they claim they are can mitigate most of these attacks.

Digital transactions make record-keeping and credit-building easier since they create a clear trail. In addition, they have security features like biometric authentication and PINs, which lower the chance of theft as compared to cash.

Banking Cards

This is the only mode of digital payment that is popular in online and physical transactions.

What is PayPal? PayPal is a online payment method that follows you wherever you go. Pay any way you want. Link your credit cards to your PayPal Digital wallet, and when you want to pay, simply log in with your username and password and pick which one you want to use.

Digital payments include any method of transferring money or digital currency between two parties using digital payment technologies. This commonly includes several types of digital payments: Online electronic payment systems: Electronic bank transfers, eChecks, and wire transfers.

In India, popular digital payment options include UPI wallets such as Paytm and PhonePe, internet banking services, debit/credit cards, and AEPS.