S

A COMPARATIVE STUDY OF TRADITIONAL PAYMENT AND ONLINE

PAYMENT

A Project Submitted to

University of Mumbai for partial completion of the degree of

Bachelor in Commerce (Accounting and Finance)

Under the Faculty of Commerce

By
NEHA CHHOTELAL GUPTA
Roll No. 14

Under the Guidance of

Prof. KAVITA J. JUIKAR

D.T.S.S. COLLEGE OF COMMERCE

Kurar Village, Malad (E),
Mumbai 400097.
2019-2020
 Declaration by learner

I undersigned Miss. Neha Chhotelal Gupta here by, declare that the work embodied
in this project work titled “A Comparative study of Traditional Payment and Online
Payment”, forms my own contribution to the research work carried out under the
guidance of Prof. Kavita Juikar is a result of my own research work and has not been
previously submitted to any other University for any other Degree/ Diploma to this or
any other University.

Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

Name and Signature of the learner

(Neha Chhotelal Gupta)

Certified by

Name and signature of the Guiding Teacher

Prof. Kavita J. Juikar)

 Acknowledgment

To list who all have helped me is difficult because they are so numerous and the depth
is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do
this project.

I would like to thank my Principal, Dr. Sussmita Daxini for providing the necessary
facilities

required for completion of this project.

I take this opportunity to thank our Coordinator Mr. Kanduri Nagraju, for her
moral support and guidance.

I would also like to express my sincere gratitude towards my project guide

Prof. Kavita J. Juikar whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference books
and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped
me in the completion of the project especially my Parents and Peers who supported
me throughout my project.
 Table of Contents

Serial No Particulars Page No

1 Declaration ii
2 Certificate iii
3 Acknowledgement iv
4 Table of Content v
5 Index vi
6 List of Tables vii
7 List of Graph / Diagram/ Chart viii
8 Chapter 1 Introduction 9-32
9 Chapter 2 Literature Review 33-35
10 Chapter 3 Research Methodology 36-38
11 Chapter 4 Data Analysis & Interpretation 39-56
Chapter 5 Finding, Conclusion and
12 Suggestions, 57-60
Bibliography 62
Annexure 63-65

Appendix - Questionnaire 63
 INDEX

Chapter Page
No Particulars
No.
1 Introduction 9-32
1.1 Introduction to Payment System 9
1.2 Types of Payment System in India 11
1.3 Traditional Payment System 11
1.3.1 Cash 12
1.3.2 Barter System 13
1.3.3 Cheques 16
1.4 Online Payment 17
1.4.1 Account Based System 18

I. Credit Card 18

II. Debit Card 20

III. Mobile Payment System 22

1.4.2 Electronic Currency System 25

I. Smart Card 25
1.5 Online Payment Process 29
2 Literature Review 33-35
2.1 Introduction 33
2.2 Published Research Paper / Articles 33
3 Research Methodology 36-38
3.1 Introduction 36
3.2 Objectives of the study 36
3.3 Selection of the problem 36
3.4 Research Methodology 36
3.4.1 Area of Research 37
3.4.2 Research Design 37
3.4.3 Sampling Method 37
3.4.4 Sample Size 37
3.4.5 Methods of data collection 37
3.4.6 Techniques of Data analysis 38
 3.4.7 Research Tool 38
3.5 Scope and Significance of the Study 38
3.6 Limitation of the study 38
4 Data Analysis , Interpretation and presentation 39-56
5 Findings, Conclusion and Suggestion 57-60
5.1 Findings & Conclusion 57
5.2 Suggestions 60
 List of Tables

Table No. Particulars Page No.

4.1 Ages of respondents 39
4.2 Gender vise classification 40
4.3 Occupation of respondents 41
4.4 Income of respondents 42
4.5 Types of payment system in India 43
4.6 Online vs Traditional mode of payment 44
4.7 Kind of traditional payment system 45
4.8 Digital Money 46
4.9 Using online payment system 47
4.10 Prefer to use online mode of payment 48
4.11 Kind of smart card 49
4.12 Benefit of online payment system 50
4.13 Online payment process 51
4.14 Online payment process is easy to use 52
4.15 Online payment is easiest and safety mode 53
4.16 Online payment is risky for e-payment. 54
4.17 E-payment is easy mode of payment 55
For online shopping which online mode of payment
4.18 56
people are using

7
 List of Graphs /Diagrams / Charts

Diagrams/
Particulars Page No.
Charts No.
1.2 Types of Payment System 11
1.4 Online Payment System 18
4.1 Ages of respondents 39
4.2 Gender vise classification 40
4.3 Occupation of respondents 41
4.4 Income of respondents 42
4.5 Types of payment system in India 43
4.6 Online vs Traditional mode of payment 44
4.7 Kind of traditional payment system 45
4.8 Digital Money 46
4.9 Using online payment system 47
4.10 Prefer to use online mode of payment 48
4.11 Kind of smart card 49
4.12 Benefit of online payment system 50
4.13 Online payment process 51
4.14 Online payment process is easy to use 52
4.15 Online payment is easiest and safety mode 53
4.16 Online payment is risky for e-payment. 54
4.17 E-payment is easy mode of payment 55
For online shopping which online mode of payment
4.18 56
people are using

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 CHAPTER 1
INTRODUCTION TO PAYMENT SYSTEMS
1.1 INTODUCTION
A payment system is any system used to settle financial transactions through the transfer
of monetary value. This includes the institutions, instruments, people, rules, procedures,
standards, and technologies that make its exchange possible. A common type of payment
system is called an operational network that links bank accounts and provides for monetary
exchange using bank deposits. Some payment systems also include credit mechanisms,
which are essentially a different aspect of payment.

Payment systems are used in lieu of tendering cash in domestic and international
transactions. This consists of a major service provided by banks and other financial
institutions. Traditional payment systems include negotiable instruments such
as drafts (e.g., cheques) and documentary credits such as letters of credit. With the advent
of computers and electronic communications, many alternative electronic payment systems
have emerged. The term electronic payment refers to a payment made from one bank
account to another using electronic methods and forgoing the direct intervention of bank
employees. Narrowly defined electronic payment refers to e-commerce—a payment for
buying and selling goods or services offered through the Internet, or broadly to any type
of electronic funds transfer.

Modern payment systems use cash-substitutes as compared to traditional payment systems.

This includes debit cards, credit cards, electronic funds transfers, direct credits, direct
debits, internet banking and e-commerce payment systems.

Payment systems may be physical or electronic and each has its own procedures and
protocols. Standardization has allowed some of these systems and networks to grow to a
global scale, but there are still many country-specific and product-specific systems.
Examples of payment systems that have become globally available are credit
card and automated teller machine networks. Other specific forms of payment systems are
also used to settle financial transactions for products in the equity markets, bond
markets, currency markets, futures markets, derivatives markets, options markets.
Additionally. Forms exist to transfer funds between financial institutions. Domestically this

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is accomplished by using Automated clearing house and real-time gross settlement (RTGS)
systems. Internationally this is accomplished using the SWIFT network.

A payment system is a set of processes and technologies that transfer monetary value from
one entity or person to another. Payments are typically made in exchange for the provision
of goods, services or to satisfy a legal obligation.

They can be made in a variety of currencies using several methods such as cash, checks,
electronic payments and cards. The essence of a payment system is that it uses cash-
substitutes, such as checks or electronic messages, to create the debits and credits that
transfer value. The value that is being transferred is typically stored in depository accounts
at banks or other types of financial institutions. The banks, in turn, are connected to a set
of payment systems that they use to process payments on behalf of their customers or
depositors. Most US banks are members of a number of different payment systems such as
Fedwire (US Federal Reserve Bank network), Point of Sale (POS) and card networks such
as NYCE (New York Cash Exchange, a subsidiary of FIS) and CHIPS (Clearing House
Interbank Payment Systems). Other countries have similar systems such as CNAPS
(China), BOJNET (Japan) and SPEI (Mexico). Banks operating in multiple countries
connect to payment systems in each of the countries where they operate either directly or
through a correspondent bank.

Significantly for the settlement process and for the discussion of less conventional
payment systems, banks in many countries typically maintain accounts with a country’s
central bank and participate in the central bank’s payment systems. In the Eurozone, the
authorities have taken it a step further by creating SEPA, the Single European Payments
Area, under the authority of the European Central Bank (ECB). SEPA was created to
provide standardized payments processing and fees among all the various countries within
the Eurozone. In the simplest case involving the traditional banking system, payments
involve four participants:

The payer: Makes the payment and has its bank account debited for the value of the
transaction.

The payer’s financial institution: Processes the transaction on the payer’s behalf.

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The payee’s financial institution: Processes the transaction on behalf of the payee and
generally holds the value in an account.

The payee: Receives value of the payment by credit to its account.

1.2 TYPES OF PAYMENT SYSTEM IN INDIA

TYPES OF
PAYMENT
SYSTEM IN INDIA

TRADITIONAL ONLINE
PAYMENT PAYMENT

CASH BARTER SYSTEM CHEQUE DIGITAL CARDS

Diagram 1.2 Types of payment system in India

1.3 TRADITIONAL PAYMENT SYSTEMS

The Payment System of a country provides the channels essential for conducting trade,
commerce and other economic activities smoothly and efficiently. An efficient payment
system not only functions as a lubricant to speed up the flow of liquidity in the economy,
but also stimulates economic growth of the country. Payment process is a vital aspect of
financial intermediation; it enables the creation and transfer of liquidity among different
economic agents. A smooth, well-functioning payment system not only ensures efficient
utilization of scarce resources but also eliminates systemic risk” (RBI, 1998).
Payment instruments and mechanisms have a very long history in India. The payment
instruments during the earliest period consisted of coins that were punch marked or cast in
silver and copper, and the credit system, which included bills of exchange, were
Traditional payment methods include cash, checks, credit and debit cards.

11
These contained details such as the name of the debtor and the creditor, the amount of loan,
the rate of interest, conditions of payment as well as the time of repayment. The deed was
to be witnessed by a respectable person and endorsed by the loan deed writer. During the
Buddhist period, the loan deeds were known as inapanna. During the Maurya period, the
instrument in use was called as adesha, which was an order on a banker, to pay the sum
mentioned in the note to a third person. Merchants in large towns used to exchange letters
of credit with one another. Even promissory notes were in use.

1.3.1 CASH:

The first payment system that is most common is cash. Cash can be defined as legal tender
that has been defined by a national authority and represents certain value. The number of
transactions made with cash is the biggest. Why does cash still remain that popular
nowadays? Cash requires no authentication; it is portable and also provides the instant
power to purchase for those who have it on them.

A. ADAVANTAGE OF USING CASH PAYMENT

1. Cash is instantly convertible into different forms of value and does not need any
intermediation. With cash we can easily make small payments also called micro
payments. Moreover, there is no financial risk for the seller.
2. Advantage for the merchant is that the sale cannot be repudiated. In order to
complete a sale using cash you do not need to use any special hardware that might
be very expensive.
3. Instant money in hand, except taxes of course. (Hey, nothing is entirely free!)
4. There are no transaction fees with cash like there are with credit cards
5. Minimizes bookkeeping, which means less stress & less hassle
B. DISADVANTAGE OF USING CASH PAYMENT
1. There is certain financial risk for the consumer when carrying cash for making
purchases because it can get stolen or even lost.
2. Cash does not provide float time for consumers. This means that there is no actual
time between the making of the purchase by the consumer and the payment.

12
 3. Cash purchases are irreversible and final unless the merchant has some return
policy. Unauthorized use cannot be prevented in any way.
4. Money in the drawer can be tempting for some employees to steal
5. A safe needs to be on site or frequent trips to the bank for deposits must be made,
which takes time and money.
6. Money at your location increases your risk for theft not just from employees but
criminals as well.

1.3.2 BARTER SYSTEM

Money is something which is generally accepted as a medium of exchange. It is one of the
most basic and significant inventions of mankind. Before money came into use, exchange
took place through barter system, i.e., goods were exchanged for goods.

Barter means direct exchange of goods. In other words, barter refers to exchanging of
goods without the use of money. For example, corn may be exchanged for cloth, house for
horses, bananas for oranges and so on.

A barter system is an old method of exchange. The is system has been used for centuries
and long before money was invented. People exchanged services and goods for other
services and goods in return. Today, bartering has made a comeback using techniques that
are more sophisticated to aid in trading; for instance, the Internet. In ancient times, this
system involved people in the same area, however today bartering is global. The value of
bartering items can be negotiated with the other party. Bartering doesn't involve money
which is one of the advantages. You can buy items by exchanging an item you have but no
longer want or need. Generally, trading in this manner is done through online auctions and
swap markets.

A. ADVANTAGES OF BARTER SYSTEM PAYMENT

1. It is a simple system devoid of the complex problems of the modern monetary
system.
2. There is no question of over or under-production (or of unemployment or over-hill
employment) under the barter system since goods are produced just to meet the
needs of the society.

13
 3. The problems of international trade, such as, foreign exchange crisis, adverse
balance of payments, do not exist under barter system.
4. There is no problem of concentration of economic power into the hands of a few
rich persons under the barter system because there is no possibility of storing the
commodities.
5. Personal and natural resources are ideally utilized to meet the needs of the society
without involving any wastage.
6. The barter system also reaps the benefits of division of labour because it represents
a great step forward from a state of self- sufficiency hi which every man has to be
a jack of all trades and master of none.

B. DISADVANTAGES OF BARTER SYSTEM PAYMENT

1. Double Coincidence of Wants: Under barter system, a double coincidence of wants is

required for exchange. In other words, the wants of the two persons who desire to exchange
goods must coincide. For example, if person A wants to acquire shoes in exchange for
wheat, then he must find another person who wants wheat for shoes.

Such a double coincidence of wants involves great difficulty and wastage of time in a
modern society, it rarely occurs. In the absence of a double coincidence of wants, the
individuals under barter system are compelled either to hold goods for long periods of time,
or to make numerous intermediary exchange’ ii order to get finally the goods of their
choice.

2. Absence of Common Measure of Value: Even if it is possible to have the double

coincidence of wants, the absence of a common measure of value creates great problem
because a lot of time is wasted to strike a bargain. Since there is no common measure in
terms of which the value of a commodity can be expressed, the problem arises how much
wheat should be exchanged for how many pairs of shoes.

In fact, under the barter system, every good must be expressed in terms of every other good.
If, for example, there are 1000 goods in the economy, then, in the absence of monetary

14
unit, every good can be exchanged for the remaining 999 goods. What is true for one good
will be true for all other 999 goods.

3. Lack of Divisibility: Another difficulty of barter system relates to the fact that all goods
cannot be divided and subdivided. In the absence of a common medium of exchange, a
problem arises, when a big indivisible commodity is to be exchanged for a smaller
commodity. For example, if the price of a horse is equal to 10 shirts, then a person having
one shirt cannot exchange it for the horse because it is not possible to divide the horse in
small pieces without destroying its utility.

4. The Problem of Storing Wealth: Under a barter system, there is absence of a proper
and convenient means of storing wealth or value, (a) As opposed to storing of generalized
purchasing power (in the form of money) in a monetary economy, the individuals have to
store specific purchasing power (in the form of horses, shoes, wheat etc.) under the barter
system which may decrease in value in the due course of time due to physical deterioration
or a change in tastes, (b) It is very expensive to store specific goods for a long time, (c)
Again the wealth stored in the form of specific goods may create jealousy and enmity
among the neighbors or relatives.

5. Difficulty of Deferred Payments: The barter system does not provide a satisfactory unit
in terms of which the contracts about the deferred (future) payments are to be written. In
an exchange economy, many contracts relate to future activities and future payments.
Under barter system, future payments are written in terms of specific goods. It creates many
problems. Chandler has mentioned three such problems:

(a) It may create controversy regarding the quality of goods or services to be repaid in
future,

(b) The two parties may be unable to agree on the specific good to be used for repayment.

(c) Both parties run the risk that the goods to be repaid may increase or decrease in value
over the period of contract.

6. Problem of Transportation: Another difficulty of barter system is that goods and services
cannot be transported conveniently from one place to another. For example, it is not easy

15
and without risk for an individual to take heaps of wheat or herd of cattle to a distant market
to exchange them for other goods. With the use of money, the inconveniences or risks of
transportation are removed.

1.3.3 CHEQUES

A cheque is an order to transfer funds from the payer’s bank to the account of the payee.
Cheques are generally valid for six months after the date of issue. The use of cheques has
traditionally dominated Fijian non cash payments. Despite the development of other
payment instruments, cheques remain an important form of payment. A cheque is
effectively a future promise to pay the amount stated on it and needs to be presented to a
bank in order to obtain the payment. Cheque clearance usually takes 3 - 4 working days.
Checks have always seemed funny to me, don’t get me wrong, we all use them, but a check
is simply an I.O.U. (“I owe you”). Checks have been around for probably longer than you
think but lately are becoming somewhat of a dying form of payment. With the technology
boom of online banking & online bill pay, which have become a fast favorite for most
people, written checks are becoming less and less common. However for a merchant, like
cash, the beauty of checks is that it costs nothing to accept.

A. ADVANTAGES OF CHAQUE PAYMENT SYSTEM

1. Some customers prefer to pay with a check instead of carrying cash or using a credit
card. The age of your customers may also be a factor, folks over the age of 40 tend
to be more comfortable with checks than with credit cards. Checks are also better to
send in the mail for payments and invoices.
2. Checks can now be processed electronically at the point of purchase much like a
credit card but cost less to process in most cases. If you team up with a large
processor, they may offer Point of Purchase check processing (P.O.P).
3. A check is usually better than a customer walking out the door because they don’t
have cash or plastic. (There are exceptions to every rule)
4. Safer than cash e.g. a crossed cheque can only be deposited into the payee’s account.
5. Preferable for large amounts and a large number of payments to avoid carrying large
sums of cash.
6. Payments can be made at your convenience and posted to the payee.

16
 B. DISADVANTAGES OF CHEQUE PAYMENT SYSTEM
1. Just because you have a check in hand, that doesn’t guarantee payment; bounced
checks can even cost you money. Depending on your bank, they may assess fees
for these bounced checks. Checking accounts can be frozen, empty or even
nonexistent. A hand full of NSF checks can mean you start bouncing checks of your
own since your account is lighter now than it should have been.
2. Customers can put stop payments on checks, close their account, and even post-
date checks if the cashier is not paying attention. All of these delay payment.
3. If your bank does not offer remote capture, you again will be spending time and
money away from your business driving to the bank regularly, hoping these are
more than “I owe you” notes.
4. Can take up to 3 – 4 working days before funds are available to use.
5. There is no guarantee that the payer has sufficient funds and hence the cheque may
become dishonored (bounce) by the bank.
6. There are extra costs if the payee wants an immediate clearance of funds. Cheques
also have other administrative costs associated to it.

1.4 ONLINE PAYMENT

Online payment is when the customer or buyer makes his payment transactions for the
goods or services purchased with the use of the Internet – to be online. “This type of
payment lowers the costs for businesses as the more payments made electronically (online
or offline) the less they spend for paper and postage. Also, it helps on improving customer
retention as he is more likely to return to the same e-commerce site where his or her
information has already been entered and stored.” with online payment, it is not necessary
for the payer to be in a long queue as payment is made in just a click of a mouse.
Additionally for example, almost all the banks have an online bill payment service where
it is offered free of charge and is available all days of the week or 24/7 shall I say.
Nevertheless, the issue on security is a crucial element to the implementation as well as
acceptance of payment both for sellers or merchants (fraud) and buyers or customers
(privacy or identity theft).

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 CREDIT CARD

ACCOUNT BASED
DEBIT CARD
SYSTEM

ONLINE MOBILE
PAYMENT PAYMENT
SYSTEM SYSTEM

ELECTRONIC
SMART CARD
CURRENCY
SYSTEM
SYSTEM

Diagram 1.4 Online Payment System

1.4.1 ACCOUNT BASE SYSTEMS

I. CREDIT CARD

Credit cards came to the market in the 1950s growing in popularity ever since. Credit
cards, like cash and checks, have come a long way since they first rolled out. Today, the
statistics show that approximately 7 in 10 Americans have at least one credit card in their
wallet. According to the U.S. Census Bureau, the population at the beginning of 2016 was
322 million people, which means there are approximately 232 million American potential
customers with credit cards ready to purchase.

This has been the dominant form of online payments when purchasing online. However,
many people still resist the appeal and simplicity of credit-card transactions due to security
concerns. Until now there are a high risk for stolen cards, identity theft thus customers fear
credit-card fraud by merchants 5 and other parties. Yet, there are some credit card issuers
who have features that provide online fraud protection.

Credit cards form another very common payment system used nowadays. A credit card is
used to represent an account which extends credit to consumers and permits them to buy
18
items while postponing the payments. There are non-profit organizations which have been
formed to set the standards for the banks which issue credit cards.

The banks are the ones that can issue credit cards. They also process all the transactions of
the consumers, calculate and receive the payments that have been made and charge and
receive interest for their services. There are third party clearinghouses or processing centers
which usually handle the process of the verification of accounts as well as balances.

A. ADVANTAGES OF CREDIT CARD

1. Guaranteed payment up to an approved limit.
2. Can be used for mail order and online purchases.
3. Accepting credit cards boost sales. Credit cards are becoming the most common
method of payment, and your customers expect the ability to pay by credit card at
any location. Studies show consumers who pay with a credit card spend more than
if they were paying with cash. Who doesn’t love a good “impulse buy?”
4. Accepting credit cards increase cash flow. Credit card transactions are deposited
directly into your account, no need to head to the bank. As a general rule, a
reputable processor should have your funds deposited within 24 – 48 hours after
settling out. (Bank standards and holidays apply, just like for all other forms of
payment)
5. Accepting credit cards creates legitimacy. Customers see those credit card logos on
your door, the brands they trust that are in their wallet, and strangely enough, there
is a transference of confidence to your business. Merchants who are “cash-only”
seem foreign and ancient in this new credit card-centric worldview.

B. DISADVANTAGES OF CREDIT CARD

1. A fee is paid to the bank for this service.
2. High interest rates make credit cards an expensive mode of borrowing.
3. Theft – if the card is stolen or if internet payment sites are not secure.

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 4. Credit Cards can add another level of difficulty to bookkeeping and accepting credit
cards can be an added monthly expense in most cases. Surcharging products can
alleviate the costs associated with credit card acceptance.
5. Credit cards do come with risks such as chargebacks and fraud. But added steps
like EMV and PCI Compliance give you the protection you need to combat fraud.
Additionally, finding a reputable processor who can help you with tokenization and
encryption is an important consideration. The more steps you take to protect your
business and your payment system at the time of set-up will allow you allay your
worries once you start processing.
6. Refunds on credit cards are not immediate. While a credit card transaction may take
seconds, the reversal or refund is not nearly as fast. Many steps are involved in
issuing refunds, the general rule of thumb for a refund to be processed on a credit
card is 2-30 days depending on many factors.

II. DEBIT CARD

Debit Card – is a payment card where the transaction amount is deducted directly from the
card holder’s bank account upon authorization. In Fiji, anyone having a bank account and
an ATM card can make payments using the card at any merchant with an EFTPOS
machine. The commercial banks are in the process of achieving total EFTPOS
interoperability in Fiji. This will allow the public to use any bank’s debit card at any
EFTPOS machine. This project will be completed in a few months. A debit card is a
payment card that deducts money directly from a consumer’s checking account to pay for
a purchase. Debit cards eliminate the need to carry cash or physical checks to make
purchases. In addition, debit cards, also called check cards, offer the convenience of credit
cards and many of the same consumer protections when issued by major payment
processors like Visa or Mastercard.

Unlike credit cards, debit cards do not allow the user to go into debt, except perhaps for
small negative balances that might be incurred if the account holder has signed up
for overdraft protection. Debit cards usually have daily purchase limits, meaning it may
not be possible to make an especially large purchase with a debit card. Debit cards

20
eliminate the need to carry cash or physical checks to make purchases, but these cards
can also be used at ATMs to withdraw cash.

Debit cards usually have daily purchase limits, meaning it may not be possible to make an
especially large purchase with a debit card. Debit card purchases can usually be made with
or without a personal identification number (PIN). Debit card purchases are easy to
monitor, and there's no way to lose track of spending, unlike using a credit card, as the
money comes directly out of a checking account.

Some debit cards also offer reward programs, similar to credit card reward programs, such
as 1% back on all purchases. With the debit card, the money for a purchased item comes
directly out of the holder’s checking account. The actual transfer of funds from the holder’s
account to the merchant’s takes place within 1 or 2 days .

A. ADVANTAGES OF DEBIT CARD

1. Card payments will only be accepted if the card holder has sufficient funds in
his/her account.
2. Can be used for mail order or online purchases.
3. Less risk than holding cash. The risk of theft is mitigated by having pin codes.
4. Easy to obtain. Once you open an account most institutions will issue you a debit
card upon request.
5. Convenience. Purchases can be made using a chip-enabled terminal or by swiping
the card rather than filling out a paper check.
6. Safety. You don't have to carry cash or a checkbook.
7. Readily accepted. When out of town (or out of the country), debit cards are usually
widely accepted (make sure to tell your financial institution you’re leaving your
city; to not have an interruption in service).
B. DISADVANTAGES OF DEBIT CARD
1. Takes up to three days for money to be received and acknowledged.
2. Operated at a fee payable to the bank.

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 3. No grace period. Unlike a credit card, a debit card uses funds directly from your
checking account. A credit card allows you to borrow funds on credit, leaving
disposable cash in your account.
4. Check book balancing. Balancing your account may be difficult unless you record
every debit card transaction.
5. Less protection. Most financial institutions will try and protect their customer
from debit card fraud. However, a customer could potentially be liable for up to
$500 on fraudulent debit card transactions compared with only $0 on credit card.
6. Be sure to check with your financial institution to learn the details. Fees. Using
your debit card for ATM transactions may be costly if the ATM is not affiliated
with your institution.

III. MOBILE PAYMENT SYSTEM

How times have changed from bartering with sea shells (8000 years ago) to wearing a
watch that pays for lattes. Mobile wallets are the newest craze to hit the market, and Apple
Pay, Samsung Pay, and Google Wallet are the front runners blazing the trail. Not all mobile
wallets are the same, some accept loyalty programs where others do not, some only accept
certain types of cards, etc. If you decide you want to be on the cutting edge of technology,
talk to your merchant service provider about what they recommend when it comes
to mobile payment options. Mobile payment (also referred to as mobile money, mobile
money transfer, and mobile wallet) generally refer to payment services operated
under financial regulation and performed from or via a mobile device. Instead of paying
with cash, cheque, or credit cards, a consumer can use a mobile to pay for a wide range of
services and digital or hard goods. Although the concept of using non-coin-based currency
systems has a long history, it is only in the 21st century that the technology to support such
systems has become widely available.

Mobile payment is being adopted all over the world in different ways. The first patent
exclusively defined "Mobile Payment System" was filed in 2000.

In developing countries mobile payment solutions have been deployed as a means of

extending financial services to the community known as the "unbanked" or "underbanked",
which is estimated to be as much as 50% of the world's adult population, according to

22
Financial Access' 2009 Report "Half the World is Unbanked". These payment networks
are often used for micropayments. The use of mobile payments in developing countries has
attracted public and private funding by organizations such as the Bill & Melinda Gates
Foundation, United States Agency for International Development and Mercy Corps.

Mobile payments are becoming a key instrument for PSPs and other market participants,
in order to achieve new growth opportunities, according to the European Payments
Council (EPC) The EPC states that "new technology solutions provide a direct
improvement to the operations efficiency, ultimately resulting in cost savings and in an
increase in business volume".

A. ADVANTAGES OF MOBILE PAYMENT

1. NFC (Near-field Communication) payments are the newest form of accepting
credit cards, and if you like to be on the cutting edge of technology you won’t
want to be left out
2. Nearly two-thirds of Americans in 2015 owned a smartphone. Chances are if your
customer has a smartphone they will likely have a mobile wallet. The more
options you can offer your clients the happier they will be.
3. Mobile payments are secure. The POS system does not have access to the full
card number so malware cannot take the information. Apple Pay, for example,
does not store your card information at all.
4. Convenience: It’s thanks to mobile payment systems that the whole online buying
experience is now effortless and much more convenient than before. Customers
can now choose to make payments anywhere, at any time with their wirelessly-
connected devices, since as the industry moves forward is also the growing
demand for convenience that goes along with it.
5. Security: By using mobile payment, consumers no longer have to assume the
security risks associated with cash or worry whether they have enough cash in their
bulky physical wallets or not since mobile payments free them of the need to carry
cash. Moreover, mobile payment is also a secure way to pay. Credit card
information is not stored on smartphones directly but on the cloud. In this way, your
vital information remains secure even if consumers happen to lose their phone.

23
6. Cost: Simply by implementing payment methods characteristic of commerce such
as barcode scanners, businesses can save the monthly costs which often
accompanied with credit card terminals.
7. Engagement: Offering mobile payment options to customers both online and
offline simply makes the purchase process easier for them. This can increase
conversion rates and the number of returning customers. Moreover, businesses are
able to speed up the checkout process and capture the business of impulse buyers
who may have been less able to buy something if a traditional transaction were
required.

B. DISADVADVANTAGES OF MOBILE PAYMENT

1. You must have NFC equipment. No NFC hardware = no mobile wallet payments
2. There are many mobile wallets out there, and they don’t all work the same, you will
have to figure out which one is right for you.
3. The rewards for the customer to use a mobile wallet are not 100% clear yet. The
customer may not receive certain “perks” at that approved retailer because the
system would show the charge coming from Google instead of the authorized
retailer.
4. Using mobile payments your transactions can be stored or tracked. This can be a
big concern for users sensitive on their privacy. Every transaction or payments that
you make would leave a digital record, which makes some people concerned about
privacy. That is true that these records are not going to be posted publicly but it can
always be privacy issues.
5. In case you want to use mobile payments for making purchases and payments
everything is tied up to your mobile phone. This is while you use the device for
many different purposes including making call, checking social media, emails, and
many other activities. But what if you face device failure? As an example your
mobile device hangs suddenly or your battery drains. In these cases you will not be
able to do any transaction until you fix the issue or charge your phone battery.

24
 6. Using any electronic payment system there are some concerns about the probability
of error in payments. Mobile payments do not allow users to keep track of payments
in a clear way so in case you face an error while making payments and the money
leaves your account but does not get to recipient you cannot track it.
7. As a business owner or retailer once you want to offer mobile payment services to
your customers you must first read and understand the terms and conditions that
are set and presented by the mobile payment company that you choose to use. This
can be somehow difficult.
8. In case you tend to accept mobile payments and offer you customers the ability to
checkout using their mobile devices you need to buy some POS hardware which
are extremely high in cost. For supporting each payment service you may need a
particular hardware this can cause you additional costs.

1.4.2 ELECTRONIC CURRENCY SYSTEM

I. SMART CARD

A smart card, chip card, or integrated circuit card (ICC) is a physical electronic
authorization device, used to control access to a resource. It is typically a plastic credit
card-sized card with an embedded integrated circuit (IC) chip. Many smart cards include a
pattern of metal contacts to electrically connect to the internal chip. Others are contactless,
and some are both. Smart cards can provide personal identification, authentication, data
storage, and application processing. Applications include identification, financial, mobile
phones (SIM), public transit, computer security, schools, and healthcare. Smart cards may
provide strong security authentication for single sign-on (SSO) within organizations.
Numerous nations have deployed smart cards throughout their populations.

The universal integrated circuit card, or SIM card, is also a type of smart card. As of 2015,
10.5 billion smart card IC chips are manufactured annually, including 5.44 billion SIM
card IC chips.

The basis for the smart card is the silicon integrated circuit (IC) chip.It was invented
by Robert Noyce at Fairchild Semiconductor in 1959, and was made possible by Mohamed
M. Atalla's silicon surface passivation process (1957) and Jean Hoerni's planar

25
process (1959) The invention of the silicon integrated circuit led to the idea of
incorporating it onto a plastic card in the late 1960s.Smart cards have since used MOS
integrated circuit chips, along with MOS memory technologies such as flash
memory and EEPROM (electrically erasable programmable read-only memory). Smart
credit card readers may be a little more costly, but they make a great investment in the long
term as technology changes and progresses.

Smart Card working process:

1. Step-1: Smart card is inserted into the card reader which reads the information from
the smart card.
2. Step-2: After the card reader reads information from the card it passes the
information to the payment system or authentication system.
3. Step-3: There after the payment system or authentication system authenticated the
user that whether the provided data matches with the database.
4. Step-4: In last step the payment system or the authentication system does the
required task.

A. ADVANTAGES OF SMART CARD

1. These cards support digital signatures, which can be used to check the guarantee
and validity issues by the organization and that the data on the card is correct and
has not been changed fraudulently since the issuance
2. More Secure: Smart card readers are more secure than their counterparts as they
use encryption and authentication technology. This is more secure than previous
methods associated with payment cards.
3. Adaptable: Smart card readers can be plugged into machines using a USB
supported system, which can operate seamlessly with sales and inventory software.
They also allow an easier time tracking customer purchases if you’re interested in
starting a loyalty program. Smart credit card readers can be linked to customer
databases to do research on customer purchases and help figure out what items are
the most popular in sales.

26
 4. Less expensive:- As compared to debit and credit cards, smart cards are less
expensive and provide faster transaction processing
5. Flexibility: Smart cards have a lot of flexibility. They can store multiple types of
information including identification, credit cards, business and family contacts.
6. Data Integrity: Information on a smart card cannot be erased or removed
accidentally by any electrical or magnetic means.
7. Smart Card Uses Smart cards are useful for setting limits on expenses, customizing
customer loyalty programs and accessing critical health care information. Smart
cards save users from having to remember multiple usernames and passwords.

B. DISADVANTTAGE OF SMART CARD

1. Easily Lost: Like a credit card, smart cards are small, lightweight and can be easily
lost if the person is irresponsible. Unlike credit cards, smart cards can have multiple
uses and so the loss may be much more inconvenient. If you lose a card that doubles
as a debit card, bus pass and key to the office, you could be severely inconvenienced
for a number of days.
2. Security: A second disadvantage of the using smart cards is their level of security.
They are more secure than swipe cards. However, they are not as secure as some in
the general public would believe. This creates a false sense of security and someone
might not be as diligent as protecting their card and the details it holds.
3. Slow Adoption: - If used as a payment card, not every store or restaurant will have
the hardware necessary to use these cards.
4. One of the reasons for this is since technology is more secure, it is also more
expensive to produce and use. Therefore, some stores may charge a basic minimum
fee for using smart cards for payment, rather than cash.
5. Smart cards will face the problem of the high price of product complements who
wart cards themselves are nearly cheap card readers are not. However, in an effort
to make smart cards more used companies are tried to create and propose solutions.
6. The pet problem taking smart cards as their level of security in order for smart cards
to reach their potential must be able to interact with a host of interfaces and must

27
 be done so securely But there is an issue with security involves the public
perception of the technology and people might not be aware enough about how
protecting the card and the personal details holds because they believe that the cards
ace secure but may are not maare that all of the information plearved from the smart
cards uses collected and analyzed somewhere and somehow.
7. Smart cards west and ght weighted They are my jou voe mulle western CM
CRUISE Sous demand and insurance to the one or more information stored on
without taking backup advanced.

C. TYPES OF SMART CARD

1. Contact Smart Card: This type of smart cards are embedded with electrical contacts
which are used to connect to the card reader where the card is inserted. The electrical
contacts are deployed on a conductive gold plated coating on the card surface.
2. Contact less Smart Card: This type of smart card establishes connection with the
card reader without any physical contact. It consists of an antenna by means of which
it is used to communicate using radio frequency band with the antenna on the reader.
It receives power from the reader via the electromagnetic signal.
3. Dual-interface cards: This type of smart card is equipped with both contact less and
contact interfaces. This type of card enables secure access to the smart card’s chip
with either the contact less or contact smart card interfaces.
4. Memory based smart card: This type of smart cards are embedded with memory
circuits. It stores, reads and writes data to a particular location. It is straight memory
card which is only used to store data or a protected memory card with a restricted
access to the memory and which can be used to write data. It can also be a
rechargeable or a disposable card which contains memory units which can be used
only once.
5. Microprocessor based smart card: This type of smart cards consist of
microprocessor embedded onto the chip in addition to the memory blocks. It also
consists of specific sections of files related with a particular function. It allows for
data processing and manipulations and can be used for multi functioning.

28
 6. Hybrid smart card: Hybrid smart card embedded with both memory and
microprocessor. Two different chips are used for different applications connected to
a single smart card based on the different functionality as the proximity chip is used
for physical access to prohibited areas while the contact smart card chip is used for
sign in authentication.

1.5 ONLINE PAYMENT PROCESS

In the processing of a credit card payment, there are several entities that play important
roles to make the online payment possible. For the payment to be successful, merchants
must connect to a network of banks (both acquiring and issuing banks), processors, and
other financial institutions so that the information provided by the customer can be routed
securely.

1. Cardholder – the individual or the entity or simply the customer that uses his credit
card to pay the purchases made online.

2. Issuing Bank – the financial institution that issues a credit card to the cardholder. The
issuing bank establishes and verifies the cardholders’ credit line to see if he has available
credit to purchase a product/service and it provides the cardholder with the monthly billing
statements, etc.

3. Credit Card Issuer/Association – a financial institution that provides credit cards and
other products for banks who privately brand the products such as Visa International or
MasterCard International. Also they often set up programs for merchants to accept the
cards. Also they are involved in operating and managing the authorization and settlement
systems worldwide. 7

4. Merchant – the entity or an individual that is selling products/goods or services. Goods

can be either hard goods (tangibles) such as apparel, computer hardware any kinds of goods
that is possible to sell over the Internet or soft goods (intangibles) such as service contracts
or pay-per-view content.

5. Acquiring Bank – an entity that is often referred to as the merchant bank or acquirer. It
is the financial institution that enables merchants to accept credit card payments. The

29
acquiring bank often works with the third-party processor to accept or decline the
cardholder’s credit card purchase or request, deposits funds into the merchant’s bank
account, provides the merchant with the periodic deposit statements, etc.

6. Payment Application – the application that is used by the merchant to request credit
card authorization and settlement of funds between the merchant and the acquiring bank.
This application can either be self-managed application or can be an outsourced service.

7. Third-party Processor – also known as payment processing networks, frontend

processors, or just processors, the organization that works with an acquiring bank
(merchant bank) to process credit card transactions via the card issuers/associations. The
third-party processor communicates to the card associations/issuers to obtain
authorizations and execute fund transfers. In some cases, the acquiring bank and the third-
party processor may be the same entity.

8. Independent sales organization (ISO) – an independent agent that solicits prospective

merchants for merchant banks, ISOs are also referred to as merchant account providers.
ISOs assist merchants in setting up merchant accounts and ensure that the accounts connect
to the third-party processors. ISOs may either assume partial or shared financial liability
for merchant activity.

When using the credit card for online payment, merchant’s account must be in place with
the acquiring bank or with the third party service. As soon as the customer makes a
purchase online and pays using his credit card, he is required to submit his credit card
information which is then sent securely over the Internet to the merchant’s. Nevertheless,
please take note that this is a simple and generic online transaction processing,
authorization and settlement where potential steps can be added into it [4]:

1. Card issued: The customer has a credit card with him issued by the issuing bank with
the credit limit and an available balance.

2. Buy button: The customer visits a web site or the online shop using standard web
browser and start shopping and add the product(s) into his shopping cart. Upon 8 checkout,
he is required to submit his credit card information, expiration date, billing address. After
which, he also selects the method of shipping for example and then click on the submit

30
button to initiate the transaction. The information is then transmitted to the merchant’s
online shop where the outsourced payment service is setup. The outsourced payment
service receives the encrypted information from the online shop, perform a fraud check,
and then initiate the process of communicating the billing information and purchase
amount to the third-party processor.

3. Authorization request: The outsourced payment service encrypts the purchase

information or data and transmits it to the third-party processor, who will forward the
information or data further to the card association or card issuer for authorization and
verification.

4. Authorization response: The issuing financial institution verifies the credit card
information and determines whether the customer has sufficient credit available to pay for
the purchase. An authorization number is generated and the available credit is reduced by
the authorized amount. If it so happen that the credit card information is not correct or if
there is not enough available credit, then a message declining the transaction is generated.
9 During this short span of time, the issuing bank also performs other operations such as
address verification service (AVS), where the billing information entered online is
compared to the entry in the issuing bank’s database – this is the authentication part. After
which, an authorization message is returned to the card association and forwarded to the
third-party processor.

5. Merchant notification: The third-party processor receives the authorization message

and other pertinent information from the card association or issuer and initiates the process
of communicating the authorization message to the merchant. The third-party processor
encrypts the authorization message and transmits the encrypted information to the
merchant’s secure commerce server.

6. Shopper notification: The merchant’s server receives the information and is

programmed to send immediately the purchase approval or decline message to the
cardholder/customer. Normally when the credit card was declined, some pertinent
information like a suggestion to check for the accuracy of the information provided or to
use a different credit card is sent. As soon as the customer receives this information for
example approved transaction he at the same time receives a confirmation number. It takes

31
only a few seconds end-to-end from the moment that the customer hit the buy button until
he receives the authorization message back. The authorization process usually takes a few
seconds, depending on the merchant’s payment application and procedures as well as
Internet traffic and other factors. 7. Fulfillment: The merchant begins the process of
fulfilling the customer’s order with the appropriate product/service.

8. Settlement request: The merchant compiles a batch of orders that have been fulfilled
and begins the process of transmitting batch to the third-party processor for the settlement.
The merchant first transmit the batch to his payment service that encrypts the purchase
information and transmits the encrypted information to the third-party processor. The third-
party processor receives this information and sends the settlement instructions to the
appropriated financial institution to transfer the ticket amount from the cardholder’s
account to the merchant’s account.

9. Settlement: For each credit card transaction in the batch, the appropriated financial
institution is debited and the cardholder’s credit card statement is updated. The acquiring
bank receives the funds and makes a deposit into the merchant’s bank account.

10. Settlement response: The merchant receives the notification that the funds have been
deposited into his bank account. On a periodic basis, the merchant 10 receives reports that
he can use to reconcile with his batch settlement requests with his deposit activity.

11. Funds available: The interval between the merchant’s issuance of a settlement request,
funds transfer and funds availability can take up to several days, depending on the issuing
bank, the acquiring bank and the third-party processor. The settlement cycle time is actually
affected by the acquiring bank’s holding period on deposits, as well as other procedures
and policies established by the acquiring banks and third-party processors.

32
 CHAPTER 02

REVIEW OF LITERATURE

2.1 INTRODUCTION
The advent of e-commerce together with the growth of the Internet promoted the
digitization of the payment process with the provision of various online payment methods
like electronic cash, debit cards, credit cards, contactless payment, mobile wallets, etc.
Besides, the services provided by mobile payment are gaining popularity day-by-day and
are showing a transition by advancing towards a propitious future of speculative prospects
in conjunction with the technological innovations. This paper is aimed at evaluating the
present status and growth of online payment systems in worldwide markets and also takes
a look at its future. In this paper, a comprehensive survey on all the aspects of electronic
payment has been conducted after analysis of several research studies on online payment
systems. Several online payment system services, the associated security issues and the
future of such modes of payment have been analysed. This study also analyses the various
factors that affect the adoption of online payment systems by consumers. Furthermore,
there can be seen a huge growth in mobile payment methods globally beating both debit
and credit card payments, all due to the convenience and security offered by them.
Nevertheless, various obstacles have been identified in the adoption of online payment
methods; thus, some measures have to be taken for granting this industry a hopeful future.
Thus, there should be a suitable trade-off between usability and security when designing
online payment systems in order to attract customers. Also, technical and organisational
issues which arise in the attempt to achieve interoperability must be taken into
consideration by the designers. As a matter of fact, the process of developing interoperable
and flexible solutions and universal standards is one of the most difficult tasks in the future
ahead.

2.2 PUBLISHED RESEARCH PAPER / ARTICLES

Sujith T S, Julie C D (2017)1 the article entitled “Opportunities and Challenges of E-

Payment System in India”. This study aimed to identify the issues and challenges of
electronic payment systems and offer some solutions to improve the e-payment system. E-

33
payment system not only provides more opportunities but many threats also. The study
found that, Digital revolution has provided an easy way to go for digital payments. The
study also found that, the reach of mobile network, Internet and electricity is also
expanding digital payments to remote areas. This will surely increase the number of digital
payments.

Mamta, Prof. Hariom Tyagi and Dr. Abhishek Shukla (2016)2 the article entitled “The
Study of Electronic Payment Systems”. This study aimed to identify the issues and
challenges of electronic payment systems and offer some solutions to improve the e-
payment system quality. The successful implementations of electronic payment systems
depends on how the security and privacy dimensions perceived by consumers as well as
sellers are popularly managed, in turn would improve the market confidence in the system.

Preeti Garg and Manvi Panchal (2016)3 the article entitled “Study on Introduction of
Cashless Economy in India 2016: Benefits and Challenge’s”. This paper studied the views
of people on introduction of cashless economy in India. The study was conducted in Delhi
region and data was collected with the help of structured questionnaire and analyzed using
simple percentage method. Responses from respondents shows that cashless economy will
help in curbing black money, counterfeit‟s fake currency, fighting against terrorism, reduce
cash related robbery, helps in improving economic growth of our country. Major
challenges that can hinder the implementation of the policy are cyber fraud, high illiteracy
rate, attitude of people, lack of transparency and efficiency in digital payment system. The
study found that, the introduction of cashless economy in India can be seen as a step in
right direction. It helps in growth and development of economy in India

Vidya Shree DV, Yamuna N. and Nitua Shree G (2015)4 the article entitled “A Study
on new Dynamics in Digital Payment System - with special reference to Paytm and Pay U
Money”. The research paper is focusing on the impact of the new digital payments systems
on customers and problems encountered if any. The study found that, people are more
aware about the online payments through mobile applications and there is a wider increase
in growth rate. The study also found that, Paytm and Pay U money is providing easy
payment structures compared to Digital payment system.

34
Prof. Pushpa S. Abbigeri and Dr. Rajeshwari M. Shettar5 has explained that Payment
system plays an important role in driving the economic and social development of the
country. The last decade has seen tremendous growth in use of internet and mobile phone
in India. Increasing use of internet, mobile penetration and government initiative such as
Digital India are acting as catalyst which leads to exponential growth in use of digital
payment. Electronics Consumer transaction made at point of sale (POS) for services and
products either through internet banking or mobile banking using smart phone or card
payment are called as digital payment.

Sujith T S, Julie C D6 He studied that the payment system in any country needs to pass
the litmus test of safety, security, soundness, efficiency, and accessibility. In order to
address all these, payment systems have evolved from barter to currency, to digital systems.
We are witnessing enormous change in the payment systems, disrupting the monopoly of
physical/paper-based system by electronic ones. Digital payment is a way of payment
which is made through digital modes. In digital payments, payer and payee both use digital
modes to send and receive money. It is also called electronic payment. No hard cash is
involved in the digital payments. All the transactions in digital payments are completed
online. It is an instant and convenient way to make payments. Digital payments save you
from long queues of ATMs and banks.

35
 CHAPTER 03
RESEARCH METHDOLOGY
3.1 INTRODUCTION
Research is something that people undertake in order to find out things in a systematic way.
Research can be seen as the collection and analysis of data from a sample of individual or
organization relating to their characteristics, behavior, attitudes, opinions, and possessions.
(Jon & Roger 2002. 7).

Research methodology is the specific procedures or techniques used to identify, select,

process, and analyse information about a topic. In a research paper, the
methodology section allows the reader to critically evaluate a study’s overall validity and
reliability. The methodology section answers two main questions: How was the data
collected or generated? How was it analysed?

3.2 OBJECTIVES OF THE STUDY

1. To know the concept of payment system in India

2. To evaluate the difference traditional payment and online payment

3. To analyse which payment system is more beneficial to the people.

4. To observe which payment system people are prefer to use.

3.3 SELECTION OF THE PROBLEM

This project topic is selected to know the problems related to traditional payment system
and online payment. From the questionnaire tool it is found that is traditional payment or
online payment is risky/easy.

3.4 RESEARCH METHODOLOGY

The process used to collect information and data for the purpose of making business
decisions. The methodology may include publication research, interviews, surveys and
other research techniques, and could include both present and historical information.
It is a document written by researcher to describe the idea for an investigation on a
certain topic.

36
3.4.1 Area of Research
For this research work I collected the from Mumbai city.

3.4.2 Research Design

Research design is the framework of research methods and techniques chosen by a

researcher. The design allows researchers to hone in on research methods that are suitable
for the subject matter and set up their studies up for success.

There are three main types of research design: Data collection, measurement, and
analysis. In this research project Descriptive Research Design was adopted.

3.4.3 Sampling Method

In this research work for collection, analysis and presentation of data I chose simple
random sampling method.

3.4.4 Sample Size

The sample size selected by me for the research study was 100 respondents.

3.4.5 Methods of Data Collection

For the purpose of research study I collected data from primary as well as secondary data
method.

1. Primary Data:-

Primary data have been collected from respondents. For the purpose of primary data
collection the Questionnaire was prepared for the required information.
Questionnaires were circulated to the respondents. Accordingly primary data was
collected. Also the survey has been conducted for collection of data.

2. Secondary Data:-

The secondary data was collected from various sources such as journals, books, websites,
newspapers and published and unpublished research papers.

37
3.4.6 Research Tools

The questionnaire given in the appendix was used to collect data from the various
respondents.

3.4.7 Techniques of Analysis

For the purpose of research work the technique used for analysis was bar diagram, graphs,
pie charts and line charts etc.

3.5 SCOPE AND SIGNIFICANCE OF THE STUDY

It has a significant to the respondents who are using online payment system and
traditional payment system. From this research they would able to know the types/
benefits of traditional payment system and online payments.

3.6 LIMITATION OF THE STUDY

1) Time

The study is related to the period of three months but this period is not sufficient for the
comparative study of tax planning. Within three months it is not possible to collect data
from respondents and it is limitation for the research work.

2) Respondent’s bias

As the topic is related to individuals tax planning, many respondents were opposed to give
details regarding tax related matters income. Study is related to individual tax matter hence
mostly respondents have not responded fully and accurately.

3) Area of research

For this topic the three months’ time period is less, therefore the area selected for the
research study is also limited.

38
 CHAPTER 04
DATA ANALYSIS AND INTERPRETATION
Q.2 AGE
 18-25
 26-35
 36-45
 45 & above

PARTICULAR PERCENTAGE
18-25 56
26-35 14
36-45 21
45 & above 9
TOTAL 100

TABLE 4.1 AGES of Respondents

9%

21% · 18-25
· 26-35
· 36-45
56%
· 45 & above

14%

Chart 4.1 Ages of Respondent

Interpretation: There are 100 respondents. From the above Table 4.1 and Chart 4.1 it is
observe that out of 100 respondents 56% people are in 18-25 age group, 14% of people are

39
in 26-35 age group, 21% of people are in 36-45 age group and 9% of people are 45 & above
age group.

Q.3 GENDER
 Female
 Male

PARTICULAR PERCENTAGE
Female 55
Male 45
TOTAL 100

Table 4.2 Gender wise classification

45%
· Female
· Male
55%

Chart 4.2 Gender wise classification

Interpretation: There are 100 Respondents. From the above Table 4.2 and Chart 4.2 it is
indeed that out of 100 respondents 55% of people are FEMALE and 45% of people are
MALE

40
Q.4 Occupation

 Business
 Profession
 Student
 Other

PARTICULAR PERCENTAGE
Business 21.3
Profession 17.5
Student 60
Other 1.2
TOTAL 100

Table 4.3 Occupation of Respondents

1%

21%

· Business
· Profession
· Student
18%
60% · Other

Chart 4.3 Occupation of Respondents

Interpretation: From the above Table 4.3 and Chart 4.3 it is observe that there are 100
respondents out of which 21% of people are Businessman, 18% of people are professional,
60% of people are Students and 1% of people are comes under other occupation.

41
Q.5 Income
 10000-25000
 26000-35000
 36000-45000
 45000 & above

PARTICULAR PERCENTAGE
10000-25000 54.1
26000-35000 20.3
36000-45000 18.9
45000 & above 6.7
Total 100

TABLE 4.4 Income of Respondents

7%

19%
· 10000-25000
· 26000-35000

54% · 36000-45000
· 45000 & above
20%

Chart 4.4 Income of Respondents

Interpretation: It is indeed that there are 100 respondents. From the above Table 4.4 and
Chart 4.4 it is observe that out of 100 respondents 54% of people earn Rupees 10000-
25000, 20% of people earn Rupees 26000-35000, 19% of people are in the category of
income Rupees 36000-45000 and 7% of people are comes under 45000 & above income
group.

42
Q.6 RESPONDENTS KNOW THE PAYMENTS SYSTEM IN INDIA

 Traditional Payment
 Online Payment
 Or Both

PARTICULAR PERCENTAGE
Traditional Payment 15
Online Payment 21
Or Both 64
Total 100

TABLE 4.5 Types of payment system in India

15%

· Traditional Payment

· Online Payment
21%

· Or Both
64%

Chart 4.5 Types of payment system in India

Interpretation: There are 100 respondents. From the above table 4.5 and Chart 4.5 it is
observe that 15% of people know about Traditional payment system, 21% of people have
a knowledge about Online Payment system, and 64% of people know both the payment
system of India.

43
Q.7 ONLINE MODE OF PAYMENT IS MORE SECURE THAN TRADITIONAL
MODE OF PAYMENT

 Yes
 No

PARTICULAR PERCENTAGE
Yes 76
No 24
TOTAL 100

TABLE 4.6 Online vs Traditional mode of payment

24%

· Yes
· No
76%

CHART 4.6 Online vs Traditional mode of payment

Interpretation: From the above Table 4.6 and Chart 4.6 it is observe that out of 100
respondents 76% of people think that online mode of payment is more secure than
traditional mode of payment and 24% of people had an opposite view.

44
Q.8 KIND OF TRADITIONAL PAYMENT SYSTEM
 Cash
 Cheque
 Barter system

PARTICULAR PERCENTAGE
Cash 56
Cheque 35
Barter system 9
Total 100

Table 4.7 Kind of traditional payment system

9%

· Cash
· Cheque
35%
56% · Barter system

CHART 4.7 Kind of traditional payment system

Interpretation: There are 100 respondents. From the above Table 4.7 and Chart 4.7 it is
observe that in traditional payment mode of system 56% of people uses cash payment
system, 35% of people used cheque system and only 9% of people used Barter system.

45
Q.9 DIGITAL MONEY
 Yes
 No

PARTICULAR PERCENTAGE
Yes 81
No 19
TOTAL 100

TABLE 4.8 Digital Money

19%

· Yes
· No

81%

CHART 4.8 Digital Money

Interpretation: From the above Table 4.8 and Chart 4.8 it is observe that out of 100
respondents 81% of people know about Digital Money and only 19% of people don’t had
any idea about Digital Money, hence they were not using Digital Money.

46
Q.10 ONLINE PAYMENT SYSTEM
 Debit card/Credit card
 Mobile Payment System
 Smart Card System
 Other

PARTICULAR PERCENTAGE
Debit card/Credit card 45.9
Mobile Payment System 45.9
Smart Card System 8.2
Other 0
Total 100

TABLE 4.9 Using online payment system

0%

8%

Debit card/Credit card

46%
Mobile Payment System
Smart Card System

46% Other

CHART 4.9 Using online payment system

Interpretation: From the above Table 4.9 and Chart 4.9 it is observe that out of 100
respondents 46% of people used Debit card/Credit card, 46% of people used Mobile
Payment System, 8% of people used Smart Card System.

47
Q.11 PREFER ONLINE MODE OF PAYMENT
 Debit Card/Credit Card
 Smart Card
 Paytm
 Other

PARTICULAR PERCENTAGE
Debit Card/Credit Card 54.7
Smart Card 18.6
Paytm 25.6
Other 1.1
Total 100

TABLE 4.10 Prefer to use online mode of payment

1%

· Debit Card/Credit Card

26%
· Smart Card

· Paytm
55%
· Other
18%

CHART 4.10 Prefer to use online mode of payment

Interpretation: There are 100 respondents. From the above Table 4.10 and Chart 4.10 it
is observe that 55% of people were prefer to use Debit Card/Credit Card, 18% people prefer
to use Smart card payment system and 26% of people prefer to use paytm mobile
application , only 1% of people were prefer to use other mode of payment.

48
Q.12 KIND OF SMART CARD

 Contact Smart Card

 Contact Less Smart Card
 Memory Based Smart Card
 Other

PARTICULAR PERCENTAGE
Contact Smart Card 52.4
Contact Less Smart Card 19.5
Memory Based Smart Card 28
Other 1.1
Total 100

TABLE 4.11 Kind of smart card

1%

· Contact Smart Card

28%

· Contact Less Smart Card

52% · Memory Based Smart Card

· Other

19%

CHART 4.11 Kind of smart card

Interpretation: From the above Table 4.11 and Chart 4.11 it is observe that there are 100
respondents. Out of 10o respondents 52% of people were used Contact Smart Card, 19%
of people were used Contact Less Smart Card, 28% of people were used Memory Based
Smart Card and only 1% of people used other kind of smart card.

49
Q.13 BENEFIT OF ONLINE PAYMENT

 Cash Less Payment

 Easy Payment
 Faster Mode Of Payment

PARTICULAR PERCENTAGE
Cash Less Payment 41.4
Easy Payment 29.3
Faster Mode Of Payment 29.3
Total 100

TABLE 4.12 Benefit of online payment system

29%

42% · Cash Less Payment

· Easy Payment

· Faster Mode Of Payment

29%

CHART 4.12 Benefit of online payment system

Interpretation: From the above Table 4.12 and Chart 4.12 it is observe that out of 100
42% of people think that Cash Less Payment is a benefit of online payment system, 29%
of people think that online payment is easy mode of payment, and only 29% of people think
about online payment is Faster mode of payment.

50
Q.14 ONLINE PAYMENT PROCES
 Yes
 No

PARTICULAR PERCENTAGE
Yes 80
No 20
TOTAL 100

TABLE 4.13 Online payment process

20%

· Yes
· No
80%

CHART 4.13 Online payment process

Interpretation: There are 100 respondents. From the above Table 4.13 and Chart 4.13 it
is observe that out 100 respondents 80% of people know the process of online payment
process and only 20% of people were not aware about online payment process.

51
Q.15 PROCES IS EASY TO USE
 Yes
 No

PARTICULAR PERCENTAGE
Yes 82.8
No 17.2
TOTAL 100

TABLE 4.14 Online payment process is easy to use

17%

· Yes
· No

83%

Chart 4.14 Online payment process is easy to use

Interpretation: From the above Table 4.14 and Chart 4.14 it is observe that out of 100
respondents 83% of people think that online payment process is easy to use and for 17%
of people it’s found to be difficult to use.

52
Q.16 Online mode of payment is easiest and SAFTY MODE OF PAYMENT
 Yes
 No

PARTICULAR PERCENTAGE
Yes 82
No 18
TOTAL 100

TABLE 4.15 online payment is easiest and safety mode

18%

· Yes
· No

82%

CHART 4.15 online payment is easiest and safety mode

Interpretation: There are 100 respondents. From the above Table 4.15 and Chart 4.15 it
is observe that 82% of people think that online mode of payment is easiest and safety, and
18% of people had counter view against online payment.

53
Q.17 Online payment is risky for e-payment.
 Yes
 No

PARTICULAR PERCENTAGE
Yes 51.5
No 48.5
TOTAL 100

TABLE 4.16 Online payment is risky for e-payment.

49% · Yes
51% · No

CHART 4.16 Online payment is risky for e-payment.

Interpretation: From the above Table 4.16 and Chart 4.16 it is observe that out of 100
respondents for 51% of people online payment is risky for E-Payment, and 49% of people
think that online payment is not risky for E-Payment.

54
Q.18 For online shopping E-Payment is easy mode of payment
 Yes
 No

PARTICULAR PERCENTAGE
Yes 78
No 22
TOTAL 100

TABLE 4.17 E-payment is easy mode of payment

22%

· Yes
· No
78%

CHART 4.17 E-payment is easy mode of payment

Interpretation: From the above Table 4.17 and Chart 4.17 it is observe that out 100 78%
of people think that for Online shopping E-payment process is easy mode of payment, and
22% of people think it is not an easy mode for online shopping.

55
Q.19 For online shopping which online mode of payment people are using
 Debit Card /Credit Card
 Smart Card
 Paytm
 Other

PARTICULAR PERCENTAGE
Debit Card/Credit Card 45
Smart Card 22
Paytm 14
Other 19
Total 100

TABLE 4.18 For online shopping which online mode of payment people are using

19%

· Debit Card /Credit Card

45% · Smart Card

14%
· Paytm

· Other

22%

Chart 4.18 For online shopping which online mode of payment people are using

Interpretation: There are 100 respondents. From the above Table 4.18 and Chart 4.18 it
is observe that 45% of people used Debit Card /Credit Card for online shopping, 22% of
people used Smart card , 14% of people used paytm mobile application for online shopping
and E- payment, 19% of people used other mode of payment for online shopping.

56
 CHAPTER 05
FINDINGS, CONCLUSION AND SUGGESTION
5.1 FINDINGS AND CONCLUSION
Findings

Analysis 1: There are 100 respondents. From the Table 4.1 and Chart 4.1 it is observe that
out of 100 respondents 56% people are in 18-25 age group, 14% of people are in 26-35 age
group, 21% of people are in 36-45 age group and 9% of people are 45 & above age group.

Analysis 2: From the Table 4.2 and Chart 4.2 it is indeed that out of 100 respondents
55% of people are FEMALE and 45% of people are MALE.

Analysis 3: From the Table 4.3 and Chart 4.3 it is observe that there are 100 respondents
out of which 21% of people are Businessman, 18% of people are professional, 60% of
people are Students and 1% of people are comes under other occupation.

Analysis 4: From the Table 4.4 and Chart 4.4 it is observe that out of 100 respondents 54%
of people earn Rupees 10000-25000, 20% of people earn Rupees 26000-35000, 19% of
people are in the category of income Rupees 36000-45000 and 7% of people are comes
under 45000 & above income group.

Analysis 5: From the table 4.5 and Chart 4.5 it is observe that 15% of people know about
Traditional payment system, 21% of people have a knowledge about Online Payment
system, and 64% of people know both the payment system of India.

Analysis 6: From the Table 4.6 and Chart 4.6 it is observe that out of 100 respondents 76%
of people think that online mode of payment is more secure than traditional mode of
payment and 24% of people had an opposite view.

Analysis 7: From the Table 4.7 and Chart 4.7 it is observe that in traditional payment mode
of system 56% of people uses cash payment system, 35% of people used cheque system
and only 9% of people used Barter system.

Analysis 8: : From the Table 4.8 and Chart 4.9 it is observe that out of 100 respondents
81% of people know about Digital Money and only 19% of people don’t had any idea about
Digital Money, hence they were not using Digital Money.

57
Analysis 9: From the Table 4.9 and Chart 4.9 it is observe that out of 100 respondents 46%
of people used Debit card/Credit card, 46% of people used Mobile Payment System, 8%
of people used Smart Card System.

Analysis 10: From the Table 4.10 and Chart 4.10 it is observe that 55% of people were
prefer to use Debit Card/Credit Card, 18% people prefer to use Smart card payment system
and 26% of people prefer to use paytm mobile application , only 1% of people were prefer
to use other mode of payment.

Analysis 11: From the above Table 4.11 and Chart 4.11 it is observe that there are 100
respondents. Out of 10o respondents 52% of people were used Contact Smart Card, 19%
of people were used Contact Less Smart Card, 28% of people were used Memory Based
Smart Card and only 1% of people used other kind of smart card.

Analysis 12: From the above Table 4.12 and Chart 4.12 it is observe that out of 100 42%
of people think that Cash Less Payment is a benefit of online payment system, 29% of
people think that online payment is easy mode of payment, and only 29% of people think
about online payment is Faster mode of payment.

Analysis 13: From the Table 4.13 and Chart 4.13 it is observe that out 100 respondents
80% of people know the process of online payment process and only 20% of people were
not aware about online payment process.

Analysis 14: : From the Table 4.14 and Chart 4.14 it is observe that out of 100 respondents
83% of people think that online payment process is easy to use and for 17% of people it’s
found to be difficult to use.

Analysis 15: From the Table 4.15 and Chart 4.15 it is observe that 82% of people think
that online mode of payment is easiest and safety, and 18% of people had counter view
against online payment.

Analysis 16: : From the Table 4.16 and Chart 4.16 it is observe that out of 100 respondents
for 51% of people online payment is risky for E-Payment, and 49% of people think that
online payment is not risky for E-Payment.

58
Analysis 17: From the above Table 4.17 and Chart 4.17 it is observe that out 100 78% of
people think that for Online shopping E-payment process is easy mode of payment, and
22% of people think it is not an easy mode for online shopping.

Analysis 18: There are 100 respondents. From the above Table 4.18 and Chart 4.18 it is
observe that 45% of people used Debit Card /Credit Card for online shopping, 22% of
people used Smart card , 14% of people used paytm mobile application for online shopping
and E- payment, 19% of people used other mode of payment for online shopping.

Conclusion:

After studying the theory of the online payment, I realized online payment is very popular
nowadays. I found out that there are so many online payment systems I had not heard about
before. Most of people want to shop online and use online payment to purchase. Since I
study abroad, I am familiar with both European and Chinese online payment behavior. It
seems that the process is the same both in Europe and China, but in China there are some
processes forbid to use by government.

From the above studies and detailed analysis it is conclude that in India there are two
payment system i.e. Traditional payment system and Online payment system. 64% of the
respondents know about both the payment systems. A payment system is a set of processes
and technologies that transfer monetary value from one entity or person to another.
Payments are typically made in exchange for the provision of goods, services or to satisfy
a legal obligation. Traditional payment systems include negotiable instruments such
as drafts (e.g., cheques) and documentary credits such as letters of credit. With the advent
of computers and electronic communications, many alternative electronic payment systems
have emerged. Modern payment systems use cash-substitutes as compared to traditional
payment systems. This includes debit cards, credit cards, electronic funds transfers, direct
credits, direct debits, internet banking and e-commerce payment systems.

15% of respondents are using traditional payment, because only 24% of people think that
traditional payment system is more secure than online payment system. In traditional
payment system 56% of people are using cash payment and remaining people are using
cheque and other systems.

59
Nowadays, mostly 81% percent of the people are aware about Digital Money. For online
payment people are using various kind of available systems such as Debit cards/ Credit
cards, Mobile applications (Paytm, Phone pe etc.) and Smart cards etc.

After a comparative analysis it is found that Online Payment system is more preferable to
use by people. Because people think it has a many benefits such as it is cashless payment,
easy and faster mode of payment etc. 82% of people think that online payment process is
easy to use and provides safety.

For online shopping 45% of people are using Debit card/Credit card and remaining people
are using smart card and paytm system of payment. Only some people are using cash
payment (i.e. Traditional payment)

Demonetization has presented a unique platform for adoption of digital payment, as an

alternative to cash for Indian consumers. Cashless economy will help in curbing black
money, counterfeit‟s fake currency, fighting against terrorism, reduce cash related robbery,
helps in improving economic growth of our country.

Major challenges that can hinder the implementation of the policy are cyber fraud, high
illiteracy rate, attitude of people, lack of transparency & efficiency in digital payment
system.

5.2 SUGGESTIONS

From the detailed study and data collected from questionnaire it is observe that so many
respondents are aware about online payment system. They think traditional payment
system is risky because it includes cash which can be theft by any one at any time, so it is
suggested to those respondents who are using traditional payment system can use online
payment system which saves time and not create a trouble of theft.

As we all know our Prime Minister trying to convert cashless payment system in India
which is related to Digital Money. Whereas some respondents has a counter view
regarding online payment because it is related to Debit card/ Credit card, Smart card and
other Mobile application. They think however it is easy to use and saves time and cashless
payment but it also has a problem of account hacking. It is suggested to all those who think
that it can be solve by securing their OTP and passwords related to account.
60
Government has to bring transparency and efficiency in e-payment system, strategies used
by government and RBI to encourage cashless transactions by licensing payment banks,
promoting mobile wallets.

As a part of „Make in India‟ initiative by the government, RuPay cards, Aadhar based
payment systems should be given preferential treatment. Government should withdraw
service charge on cards and digital payments.

Measures to discourage use of cash, by introducing charges on withdrawal of money

beyond a limit.

A financial literacy campaign should be conducted by government time to time to make

population aware of benefits of electronic payments.

To improve financial inclusion, in addition to business correspondents, e-Seva Kendras

etc. may be allowed to make micro receipts and payment transaction using Aadhar
authentication.

To accelerate the adoption of digital payments, women should be educated through

campaigns. Financial literacy will lead to women empowerment. This will lead to digital
and social revolution.

61
 BIBLIOGRAPHY
Books
 Menon Mithradas and K M Bhattacharya, (2007) Credit cards: Issues and
Perspectives, The icfai University Press. pp 27.

Websites
 https://www.theseus.fi/bitstream/handle/10024/139600/Yang_Wenjing.pdf?se
quence=1&isAllowed=y
 https://www.questionpro.com/blog/research-design/
 https://en.wikipedia.org/wiki/Payment_system
 https://thesai.org/Downloads/Volume8No5/Paper_32
A_Compendious_Study_of_Online_Payment_Systems.pdf
 http://www.smartcardbasics.com/smart-card-types.html
 https://us.nxgen.com/advantages-and-disadvantages-of-different-payment-types/
 https://medium.com/@Sophia1212/advantages-and-disadvantages-of-different-
payment-methods-57d1158e3c1a
 https://www.ijbmi.org/papers/Vol(7)7/Version-2/A0707020105.pdf
 https://www.researchgate.net/publication/316479798_Study_on_Introduction_of_Cas
hless_Economy_in_India_2016_Benefits_Challenge's

62
 QUESTIONAIRE

PERSONAL DATA
Q.1 Name: _______________________________
Q.2 Age:
 18-25
 26-35
 36-45
 45 & above
Q.3 Gender
 Female
 Male
Q.4 Occupation
 Business
 Profession
 Student
 Other
Q.5 Income
 10000-25000
 26000-35000
 36000-45000
 45000 & above
SURVEY DATA
Q.6 Do you know in India which kind of a payment system is followed?
 Traditional Payment
 Online Payment
 Or Both
Q.7 Do you think online mode payment system is more secure than traditional mode of
payment?
 Yes
 No

63
Q.8 Which kind of traditional payment system you prefer?
 Cash
 Cheque
 Barter system

Q.9 Do you know about digital money?

 Yes
 No
Q.10 Which kind of online payment system you are using?
 Debit card/Credit card
 Mobile Payment System
 Smart Card System
 Other
Q.11 Which mode of online payment system you prefer?
 Debit Card/Credit Card
 Smart Card
 Paytm
 Other
Q.12 Which kind of smart card you use?
 Contact Smart Card
 Contact Less Smart Card
 Memory Based Smart Card
 Other
Q.13 Do you know about benefit of online payment system?
 Cash Less Payment
 Easy Payment
 Faster Mode Of Payment
Q.14 Do you know about online payment process?
 Yes
 No
Q.15 Do you think online payment process is easy to use ?
 Yes
 No

64
Q.16 Do you think online payment system is easiest and safety mode of payment?
 Yes
 No
Q.17 Do you think online payment is risky for e-payment?
 Yes
 No

Q.18 Do you think for online shopping E-Payment is easy mode of payment?
 Yes
 No
Q.19 For online shopping which online mode of payment you are using?
 Debit Card /Credit Card
 Smart Card
 Paytm
 Other

65