Digital transaction modes

The use of digital transactions is on the rise, be it in the form of internet banking, debit card payments, National Electronic Fund Transfer (NEFT), Real Time Gross Settlement (RTGS) or Unified Payment Interface (UPI). These payment modes can be used by investors to invest in various financial products. Let us look at some of the features of these payment modes.

Internet banking: This is, by far, the most popular mode of investment. The investor can make payment directly through his/her bank account and buy stocks, mutual fund units and other investment instruments through this mode. Although the amount is debited from the investor’s bank account instantly, it gets credited to the payee’s account next day or the day after, so the transaction is not instant.

Debit card payments: This is the same as making payment through internet banking, the only difference being the details of the debit card will have to be entered and verified for the transaction. The payer needs to have the requisite amount in his/her bank account to make payment through debit card, else he/she will not be able to do so. The time taken for the completion of the transaction will be one or two days.

NEFT: The investor can transfer any amount, subject to the maximum limit specified by the bank, to the payee’s bank account through this system. The banks charge a service fee for NEFT ranging from Rs 2.50 to Rs 25 per transaction (plus GST), where the actual fee depends on the amount to be transferred. The transfer of amount in NEFT does not happen in real time and takes place in batches which are settled in hourly time slots. Banks usually specify the maximum amount that can be transferred through NEFT on a single day. 

RTGS: Under this system, an investor can transfer the amount in real time and gross basis to the payee’s bank account. The NEFT charges range from Rs 25 to Rs 50 per transaction. Since the transaction happen in real time, the amount is transferred to the payee’s account within 30 minutes of the fund transfer by the remitting bank.

UPI: This system was launched by National Payments Corporation of India (NPCI). Under this system, the investor needs to have the virtual payments address (VPA) with his bank and also make sure that his bank is on the NPCI platform to effect the transfer of fund. The fund transfer under this system happens instantly.