The vision of Digital India has seeped in into the daily life of citizens of our country and has given emergence to several digital platforms over the years; digital payments being a prominent one. Digital payments are technically defined as any payment made using digital instruments. In digital payments, the payer and the payee, both use electronic modes to send and receive money, no hard cash being used.
Let us have a look at why digital payments have become more important for small businesses in the time of Covid?
- Social distance is the norm now and we need to maintain it all the time by reducing physical contact with people or objects
- Exchanging physical currency could be potentially dangerous. Hence, the most easy and convenient way for a small business is to accept payments digitally from a customer
The most popular and widely acceptable mode of digital payment available today in India is UPI. Unified Payments Interface (UPI) is an instant real-time payment system developed by National Payments Corporation of India facilitating inter-bank transactions. It is regulated by the Reserve Bank of India and works by instantly transferring funds between two bank accounts on a mobile platform. With the help of UPI, a small business merchant can collect payments from customers and a customer can make payments to the merchant for their purchase.
Some of the key aspects of UPI Payments are highlighted below:
- UPI is directly linked with the merchant bank account which can be a savings or current bank account. Money gets transferred to the merchant’s account once the customer makes the payment
- Customers just need to install an UPI enabled app and link their bank account to that app and make the required payment.
- UPI is the most economical payment acceptance model available today
- The business merchant needs a service provider who will provide a QR code in the form of an app in merchants mobile phone or could be a physical QR code in the form of a sticker which can be placed on any platform inside the business premises
- There is zero MDR (Merchant Discount Rate) on UPI or Rupay cards and it becomes a more convenient way to collect payments from customers
- Whether you are into a restaurant business, apparel business, salon & spa or any other kind of business, UPI offers ease, safety and security to customers and merchants
- UPI also gives the flexibility of a better reconciliation. Because when you are collecting payments into your account directly through UPI, the service provider can give you a reconciliation report which will have all the credits, the time of credit and the amount aligned to it which will give you better understanding and perspective of keeping the accounts
- If you are small or a medium shop owner and if you want to collect orders online and make home delivery of your products or services, then UPI can give you an edge over others in that space. You may just take an order over phone and make your product reach the customer’s doorstep. The ease of payment can be offered to your customer through facility of UPI payment in this case wherein your delivery boy collects it through UPI phone transfer.
To summarize, the three key benefits of UPI stand to be
1. No additional cost
2. Instant credit and
3. Zero MDR.