Convenience, safety or discount? The dilemma of how to pay your bills

A mobile wallet may offer discounts but allows transactions of limited amounts. And, while a bank app or internet account allows larger transactions, it might be less convenient

Just when you are about to pay your mobile phone bill by using your internet banking account, you get a message offering a discount for using a mobile wallet. Is it worth-while downloading an additional application (app) on your mobile phone for the sake of the discount?

Or, if you have to split the lunch bill with friends, should you use a person-to-person mobile app, your bank app or the Unified Payments Interface (UPI)? Given the multiplicity of payment options available nowadays, making the right choice can at times be a challenge.

Pros and cons of various modes

Broadly, customers’ decision on which payment mode to use is based on transaction value, security, convenience and discounts.

Payment transactions using mobile devices are generally more convenient, as the device can be used as one factor of customer authentication and MPIN (in most cases) as the other.

“Transactions using mobile banking apps, UPI apps or wallets are more convenient than net banking transactions, where the user has to complete two-factor authentication manually,’’ says Rajiv Anand, executive director, Axis Bank.

Choose the right mode

UPI set to be a game changer. Low-cost, convenient and can be used for both payment and fund transfer

But, only 21 banks have joined the platform and not many merchant establishments are accepting it

Maximum amount that can be transacted through IMPS is Rs 200,000; for higher amounts, use NEFT or RTGS

Use third-party mobile wallets for transferring smaller amounts, utility bills payment or for recharging

Wallets might offer discounts or cash-backs but reloading is cumbersome

For fund transfer through bank app or net banking, one has to add beneficiary, which can take time
nFor large purchases, use bank app or credit card

Today, mobile wallets are replacing pre-paid cards, which in the past were used for specific purposes like gifting and travel.

Says Deepak Chandnani, chief executive officer, South Asia and Middle East, Worldline, a payment and transactions company: “Mobile wallets are more generic and can be used to make a variety of payments. They also offer instant gratification through discounts and cashbacks. But, they have a limit with regard to the amounts you can transact,’’ he says.

Filling or re-loading the wallet can also be a chore.

Customers don’t face any such issue with bank apps. Says Deepak Sharma of Kotak Mahindra Bank: “The question is whether the effort I put in using the wallet is worth the deal I get. Bank apps are convenient, as they don’t have to be loaded like wallets.’’

Let us turn to the usages where digital payments are gaining traction.

Small-ticket transactions: Digital payments are being used extensively for these, like mobile or DTH recharge. Says Nitin Chugh, head–digital banking, HDFC Bank: “Customers prefer to use mobile wallets for recharges. Usually, these are for small amounts of Rs 100-250 and customers do it frequently, once a week or more.’’

Fund transfers: You can carry out fund transfer via bank mobile apps or third-party person-to-person apps. These apps work on the Immediate Payment Service (IMPS) platform and allow instant transfer. In a bank mobile app, you have to add beneficiaries and wait for the cooling period. With person-to-person apps, you can make payments and even request for these.

With the recently launched UPI app, customers can transfer funds using a Unique Virtual Private Address (UVPA). Currently only 21 banks offer the UPI app. Once all banks are on board and merchants start using it for accepting payments, its use is expected to increase exponentially.

“Currently, the mobile banking app is the most popular mode of fund transfer, followed by net banking. For purchase transactions, net banking has the lion’s share followed by mobile wallets,’’ says Anand.

Merchant purchases: These purchases are usually made through a credit card if the value of transaction is large, and through a mobile wallet if the amount is small.

What should you do?

Be mindful of costs. While the cost structure remains the same for most channels, take advantage of the discounts being offered to promote new channels.

For example, fund transfer is being offered free to users on UPI apps, though the cost to banks remains the same as an IMPS transaction. Generally banks pass on the fund transfer cost to users on mobile banking apps and net banking. The charge is Rs 5 per transaction in IMPS.

While security is an issue, you should not be overly concerned. According to the Reserve Bank of India (RBI) guidelines, all transactions have to be authenticated by a two-factor process.

For example, you have One Time Password (OTP), plus MPIN, plus password for mobile devices. Hence, mobile-based transactions are fairly secure. Banks have built additional layers of security, such as setting transaction limits. Customers, too, can set individual limits. Third-party wallets also have two-factor authentication and offer the option to set limits. They also give SMS alerts.

On your part, use only trusted apps. “Check if the app is asking for access to additional information, if it is storing information, and if it offers two-factor authentication,” says Chugh.

Image used for representation purpose only.

Photograph: Vincent Kessler/Reuters