In today’s digital age, most businesses are experimenting with a cashless payments model. There has been a rise in credit cards and digital payments and the decline of cash payments that are impacting the economy and society in general. 

Developments in electronic payments, payment technology and online banking mean that consumers are likely to use cashless and less. There are many ways in which a cashless climate could affect businesses in the coming years. Therefore, it is wise for most businesses to jump headfirst into this new trend of cashless business. 

For any business owner, there are many reasons to eliminate cash in the business. For the most part, it’s just more convenient since it eliminates much of the hassle that’s typical with more traditional methods of payment.

Reasons to go Cashless

  • Reduction in Operational Expenses

With cash comes dealing with and moving a physical item. Employees need to use a cash register, make arrangements for change, and count the cash drawers at the end of the day. All of that cash must be accounted for. This could mean additional time and cost. With only electronic transactions, it is also easier to automate and track sales and record trends in purchases and products.

  • Secure Method

Cash on hand could be risky especially for small businesses. When a business goes cashless, there is security in the daily transactions and operations without the worry of any misplacement of potential theft. 

  • Improved Customer Experience

Since accepting a card payment or a digital payment takes much less time than cash, your business’s efficiency at the checkout could increase tremendously once you eliminate cash exchanges. For businesses that frequently see long queues and impatient customers at peak times, switching to a card or digital payment system can vastly improve their experience. With excellent, fast service, your customers will be more likely to tell others about your business and return themselves.

Important Points to Note While Going Cashless

  • Transaction Fees and Processing Fees - If you are a small business owner in India, you already know that you are at a disadvantage when it comes to credit card fees. Interchange fees can cost about 2% per purchase, and there is no cap on fees, which means credit card companies set the rates. One fear of moving toward a cashless society is giving credit card companies more power — essentially a monopoly — over merchant transactions. Without fee caps in place, nothing is preventing credit card companies from raising their fees as more and more businesses rely on plastic.

  • Poor Customer Service - Disgruntled customers often cause cashless pioneers to backtrack. There is nothing more frustrating for a customer than trying to pay and not being able to. That’s why a quality POS (point of sale) that accepts every form of payment is so important. 

  • Cybersecurity Risks - Although the risk of theft goes down, cashless transactions are still at risk of cyberattacks. A cyber attack could result in both money and customers’ sensitive, personal information being stolen.

Additional Reading: Top 7 Mobile Payment Apps for Small Businesses in India

Types of Digital Payment Methods in India

Mentioned below are some of the common types of digital payments available in India.

  • Banking cards - Cards are widely used payment methods and come with various features and benefits such as security of payments, convenience, etc. The biggest benefit of debit/credit or prepaid banking cards is that they can be used to make other types of digital payments. For example, customers can store card information in digital payment apps or mobile wallets to make a cashless payment. Banking cards can be used for online purchases, in digital payment apps, PoS machines, online transactions, etc.

  • USSD - *99# is another digital payment method that can be used to carry out mobile transactions without downloading any app. These types of payments can also be made with no mobile data facility. This facility is backed by the USSD along with the National Payments Corporation of India (NPCI). The main aim of this type of digital payment service is to create an environment of inclusion among the underserved sections of society and integrate them into mainstream banking. This service can be used to initiate fund transfers, get a look at bank statements and make balance queries. 

  • Aadhaar Enabled Payment System (AEPS) – AEPS stands for Aadhaar Enabled Payment System. This can be used for all banking transactions such as balance enquiry, cash withdrawal, cash deposit, payment transactions, Aadhaar to Aadhaar fund transfers, etc. All transactions are carried out through a banking correspondent based on Aadhaar verification. There is no need to physically visit a branch, provide debit or credit cards, or even make a signature on a document. This service can only be availed if your Aadhaar number is registered with the bank where you hold an account. 

  • UPI - It is an interoperable payment system through which a customer holding any bank account can send and receive money through a UPI-based app. The service allows a user to link more than one bank account on a UPI app on their smartphone to seamlessly initiate fund transfers and make collect requests on a 24/7 basis and on all 365 days a year. The main advantage of UPI is that it enables users to transfer money without a bank account or IFSC code. All you need is a Virtual Payment Address (VPA). 

  • Mobile Wallets

  • Bank prepaid cards

  • Point of Sale (PoS)

  • Internet Banking

  • Mobile Banking

  • Bharat Interface for Money (BHIM) app


  1. Are there any security requirements for a cashless payment system?

Yes, some of the security requirements of digital payments that a business must follow are mentioned below:

  • Confidentiality

  • Integrity

  • Authentication

  • Availability

  • Authorization

  • Non-repudiation

  1. How do digital payments work?

Payments that are done over mobile channels and the internet are digital payments. Digital payments can also be defined as any payments that are done online via the internet or mobile-enabled services.

  1. Why are digital payments important for any business?

Since digital payments reduce the costs of providing customers with financial services, they have become a vital tool in improving financial inclusion. The convenience and safety of using insurance, payments, and savings products also increase while using digital payments.

End Note

The Government of India is constantly promoting the usage of digital payments in the country. As part of the ‘Digital India’ campaign, the government aims to create a ‘digitally empowered’ economy that is ‘Faceless, Paperless, Cashless’. Every business must join this campaign and make the most of the benefits available.