JAIIB PPB Paper-2 Module-C Unit 5: Payment System and Electronic Banking

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Apr 5

JAIIB Paper 2 (PPB) Module C Unit 5: Payment System and Electronic Banking (New Syllabus)

The IIBF has recently announced updates to the JAIIB Exam 2023, including changes to the syllabus and exam format. Candidates will now be required to complete four papers, with Paper 2 (Principles & Practices of Banking) covering Unit 5: Payment System and Electronic Banking. This unit is particularly crucial for candidates, as it will significantly impact their performance in the exam.

To assist candidates in understanding the topic, we will provide all the necessary details related to Unit 5: Payment System and Electronic Banking of JAIIB Paper 2 (PPB) Module C: Banking Technology. We strongly recommend that candidates refer to this article and utilize our Online Mock Test Series to enhance their understanding of Foreign Currency Accounts for Residents and other related aspects.

Candidates must comprehend each unit in the syllabus, including the Marketing unit, to excel in the JAIIB Certification Examination 2023 and establish a successful career in the banking sector. This unit is of great importance in the banking industry, and candidates must prepare thoroughly.

The RBI has been playing a vital role in the development and conducting of India's payment and settlement systems for both large-value and retail payments. The central bank played a pioneering role in setting up various clearing systems like ECS, National Electronic Fund Transfer (NEFT), Real-Time Gross Settlement (RTGS) system.

Electronic Clearing Systems In India

The following are some of the electronic clearing systems in India which are systemically important financial market infrastructures (SIFMIs).

ECS
NACH
NEFT
Credit Cards
RTGS
Debit Cards
CTS
PPIs
IMPS
Government Securities Clearing
UPI
Forex Clearing

National Payments Corporation of India (NPCI)

The National Payments Corporation of India (NPCI) is an initiative taken by the Reserve Bank of India (RBI) and Indian Bank's Association (IBA) to operate the retail payments and settlement systems in India. This organisation was founded in the year 2008 under the Payment and Settlement Systems Act, 2007. NPCI has been incorporated as a 'not for profit' company under section 8 of Companies Act 2013.

NPCI Full form	National Payments Corporation of India
Year of foundation	2008
NPCI headquarters	Mumbai (Maharashtra)

Latest Updates on National Payments Corporation of India

NPCI launches Global hackathon 'NPCI PayAuth Challenge'. It aims to identify alternative solutions around payment authentication methods in UPI. You can know in detail about the Unified Payment Interface – UPI on the link provided here.
WhatsApp has introduced payment services in India following approval by the NPCI. The National Payment Corporation of India approval also follows another recent direction imposing a cap of 30% of the total volume of transactions processed in Unified Payments Interface (UPI), applicable to all third-party app providers, effective from 1st January 2021.

Some payment systems/products managed by NPCI are detailed here.

National Financial Switch (NFS)
NACH
Rupay Cards
Immediate Payment Service (IMPS)
Aadhaar Enabled Payment System (AEPS)
Bharat Interface for Money (BHIM)
Unified Payments Interface (UPI)
Bharat Bill Payment System (BBPS)
Bharat QR
National Common Mobility Card (NCMC)
National Electronic Toll Collection (NETC)

National Financial Switch (NFS)

It is the largest network of shared ATMs in India. It was developed and deployed by the IDRBT in 2004, with the goal of inter-connecting the ATMs in the country and facilitating convenience banking.
It is taken over by NPCI from IDRBT on December 14, 2009. As on 31st January' 22, there were 1,203 members using NFS network connected to more than 2.55 Lac ATM.
NFS has established a strong and sustainable operational model with in-house capabilities and today can be compared at par with other major and well-established switch networks. The operational functions and services are at par with most of the global ATM networks. NFS offers the following basic services to the member like Cash Withdrawal, Balance Enquiry, PIN Change and Mini Statement.

NFS also offers value-added services on ATMs/CDMs to cardholders of participating member banks like:

Interoperable Cash Deposit (ICD)
Mobile Banking Registration (MBR)
Card-to-Card Fund Transfer (C2C)
Cheque Book Request (CBR)
Statement Request (SR)
Aadhaar Number Seeding (ANS)

National Automated Clearing House (NACH)

National Automated Clearing House (NACH) was implemented by NPCI for Banks, Financial Institutions, Corporates and Government as a web-based solution to facilitate interbank, high volume, electronic transactions which are repetitive and periodic in nature.
NACH System can be used for making bulk transactions towards the distribution of subsidies, dividends, interest, salary, pension etc. and also for bulk transactions towards the collection of payments pertaining to telephone, electricity, water, loans, investments in mutual funds, insurance premium, etc.

Immediate Payment Service (IMPS)

IMPS is an instant payment inter-bank robust electronic funds transfer system in India. IMPS offers an inter-bank electronic fund transfer service that could be accessed on multiple channels like Mobile, Internet, ATM, SMS. The service is available 24x7 throughout the year including bank holidays.

The objectives of IMPS are:

To facilitate mobile payment systems to be inter-operable across banks and mobile operators in a safe and secured manner
Enable customers to use mobile devices as a channel for accessing their bank accounts and remitting funds
To make payment simpler just with the mobile number of the beneficiary
To sub-serve the goal of the Reserve Bank of India (RBI) in the digitization of retail payments
To build the foundation for a full range of mobile-based Banking services.

Registration for Remitter/Receiver:

Register for the mobile banking service of the bank.
Get Mobile Money Identifier (MMID) (7 digit code) and MPIN from the bank Download Software (Application) for mobile banking

UPI (Unified Payment Interface)

UPI (Unified Payment Interface) is a 24*7 payment system which allows instant money transfer money to any bank account. You can also make merchant payments in a jiffy through Scan & Pay.

Features:

Instant money transfers through mobile device 24*7 and 365 days.
Single mobile application for accessing different bank accounts.
You can pay through different methods – send to mobile, send to virtual address/UPI ID, send to account number + IFSC, accept a collect money request, scan & pay
You can also set mandates i.e. AutoPay for recurring payments.
You can also pay Bills using UPI

Advantages of UPI over IMPS:

Provides Pull functionality to request money
Simplifies Merchant Payments through virtual id, QR Code
Single APP for money transfer
Facilitates transactions through single-click two-factor authentication

Bharat Interface for Money (BHIM)

Bharat Interface for Money (BHIM) is a mobile payments application based on NPCI's Unified Payments Interface (UPI). BHIM is developed by the National Payments Corporation of India (NPCI)—the umbrella organization for all retail payment systems in India.

Key Features of BHIM

The BHIM app was launched in December 2016 by the National Payments Corporation of India (NPCI). A new and modified version of Bharat Interface for Money (BHIM), BHIM 2.0 has been launched under the Ministry of Electronics and Information Technology. Under BHIM 2.0, the existing cap of Rs. 20,000 has been increased to Rs. 1,00,000, from verified merchants.
The BHIM app can replace the existing mobile wallets and can appear as a comparatively reliable option for the bank to bank transfers, unlike other e-wallets. Since the transactions happen directly from the bank accounts, there is no need to recharge the wallet and no commissions/hidden charges are required for using the app. With the BHIM UPI app, the upper limit of a single transaction is Rs. 10,000 and one can transfer Rs. 20,000 in 24 hours.

Some of the key features of BHIM are mentioned below:

The BHIM app is tied to the mobile number and device ID. So using the app on a different handset will require a separate authentication process.
Three-point authentication via mobile number, device ID, and UPI PIN.
Fingerprint-based biometric verification of transactions via Aadhaar will prevent fraudulent transactions.
UPI PIN is needed for both opening the app as well as for transactions.
Resetting UPI pin requires debit card details and OTP SMS to authenticate.
To know what other initiatives such as this is part of the Digital India campaign

Bharat Bill Payment System (BBPS)

Bharat Bill Payment System eases the payment of bills and improves the security & speed of payments through the central unit (BBPCU) & operating units (BBPOUs).

The Bharat Bill Payment System has recently been launched by the Reserve Bank of India as a mandatory system, for easing the payments of bills across geographies. The BBPS offers integrated and interoperable bill payment service with security, certainty and reliability of transactions.

The service is available in multiple payment modes, online and through a network of agents. An instant confirmation is generated for the bill payments. The BBPS will transform the society from cash to electronic payment system, making it less dependent on cash.

Objectives of BBPS

The system is accessible anytime from anywhere, making it convenient for the customers.
The system increases the trust of the customers by providing reliable services.
The multiple numbers of payment modes is an added advantage.
The system provides on the spot payment confirmation making it easily verifiable.

Benefits of BBPS

The benefits of the Bharat Bill Payment System can be divided into two categories, namely customer benefits and participant benefits.

Customer Benefits

The customers will enjoy the facility of payment of bills anywhere and at any time just by connecting to the BBPS network, online or through agents.

The access to the system will be available everywhere, including the no or minimal banking region.
Multi-modes of payment could be used like debit cards, credit cards, e-wallets, etc.
Payment for any bill from any biller could be made through a single portal.
The service centres for the bill payments will be available at the nearest to a customer's workplace or residence.
The bank branches, ATMs, Customer Service centres, etc., could be the outlet of BBPS. A customer could make payment from any BBPS outlet.
The instant confirmation in the form of SMS or email or paper receipt for the bill payment is a sign of relaxation for the customers.
Security and reliability could be entrusted in the customers with the use of this system.

Bharat QR

A QR code consists of black squares arranged in a square grid on a white background, which can be read by an imaging device such as a camera. QR contains information about the item to which it is attached. Bharat QR is P2M (Person to Merchant) Mobile payment solution which is mutually derived among NPCI, Visa and MasterCard payment networks. Users can pay the utility bills at BQR registered Merchant locations using BQR enabled mobile banking apps without sharing any user credentials with the merchant. It is a quick method of payment.
RuPay is an Indian multinational financial service payment network launched by the Reserve Bank of India (RBI) in the year 2012. It is a National Payment Corporation of India's (NPCI) initiative to boost retail payments in India. RuPay was launched with an objective of a less cash economy. It is derived from the words "rupee" and "payment", which highlights that it is India's approach to virtual card (Vcard) payments.
A RuPay debit card is a plastic card used as a method of payment issued by the bank to a customer who has a bank account with them. It has wide acceptance at any point of sale (POS) devices, automated teller machines (ATMs) and e-commerce platforms. RuPay is India's entry into the international payment market through a local card facility.
RuPay is an Indian multinational financial service payment network launched by the RBI in 2012. Here's all you need to know about RuPay debit cards.

Benefits:

Lower cost and affordability: Since the transaction processing will happen domestically, it would lead to a lower cost of clearing and settlement for each transaction. This will make the transaction cost affordable and will drive the usage of cards in the industry.
Customized product offering: RuPay, being a domestic scheme, is committed to the development of customized product and service offerings for Indian consumers.
Protection of information related to Indian consumers: Transaction and customer data related to RuPay card transactions will reside in India.
Provide electronic product options to untapped/unexplored consumer segments: There are underpenetrated/untapped consumerssegmentsin rural areasthat do not have accessto banking and financial services. Right pricing of RuPay products would make the RuPay cards more economically feasible for banks to offer to their customers. In addition, relevant product variants would ensure that banks can target the hitherto untapped consumer segments.
Inter-operability between payment channels and products: RuPay card is uniquely positioned to offer complete inter-operability between various payments channels and products. NPCI currently offers varied solutions across platforms, including ATMs, mobile technology, cheques etc. and is extremely well placed in nurturing RuPay cards across these platforms.

Digital Initiatives By The Government Of India

The vision of Digital India:

The Indian government initiated the Digital India programme to ensure that all citizens have access to the government's electronic services. Strengthening the internet infrastructure and improving internet connectivity, or making India more technologically savvy, is the best way to attain this goal. Vision of Digital India programme is to transform India into a digitally empowered society and knowledge economy.

The three key vision areas are:

Digital Infrastructure as a basic utility to Every Citizen
Governance & Services on Demand
Digital Empowerment of Citizens

Aadhar:

12-digit Aadhar number provided by the UIDAI (Unique IDentification Authority of India) to Indian individuals. Uniqueness is achieved through the process of demographic and biometric de-duplication.
The deduplication process compares the resident's demographic and biometric information, collected during the process of enrolment, with the records in the UIDAI database to verify if the resident is already in the database or not.

Pradhan Mantri Jan Dhan Yojana (PMJDY):

PMJDY is a nationwide scheme launched by the Government of India to ensure the financial inclusion of every individual who does not have a bank account in India

Advantages of PMJDY

Not a necessity to keep a minimum balance.
Rupay Debit card provided to account holders.
Accident Insurance Coverage is available.
An overdraft (OD) facility of up to Rs. 10,000 is available to qualifying account holders.
PMJDY accounts holders avail the benefits under Direct Benefit Transfer (DBT), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Atal Pension Yojana (APY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), and (MUDRA) schemes etc.

JAM (Jan Dhan Yojana, Aadhaar, and Mobile Number)

JAM is an acronym that stands for Jan Dhan Yojana, Aadhaar, and Mobile Number. The government intends to employ these three ways of identification to secure direct payments of subsidies to the poor.
Subsidy systems now in place employ an indirect approach to reaching thecountry's underprivileged. Public Distribution System (PDS), Mahatma Gandhi National Rural Employment Gurantee Act (MGNREGA), and other programmes are examples.

Key benefits of JAM are:

The JAM trinity has boosted the DBT programme and expanded its coverage from partial to ubiquitous. Aadhaar has facilitated legitimate databases while Jan-Dhan has offered bank accounts for all. JAM has helped minimize avenues of corruption, irregularities, wrong-doings, and pilferages by eliminating the need for middlemen or conduits. It has also, therefore, promoted the ease of doing business.
JAM promotes online transactions among the beneficiaries, using ATMs and payment cards instead of physical visits to the banks. In the longer run, DBT schemes like JAM will make the rural population acquainted with the concept of 'saving', thus contributing to the country's GDP as a whole.

Digidhan Abhiyaan

DBT was established to overhaul the government delivery system by, re-engineering the existing process in welfare schemes, to facilitate an easier and quicker flow of information/funds and to assure accurate beneficiary targeting, de-duplication, and fraud reduction.
DBT will improve the efficiency, effectiveness, transparency, and accountability of the government system and instil citizens' trust in the government. The use of contemporary technologies and information technology instruments will help to realise the aim of Maximum Governance Minimum Government.

Government e Marketplace (GeM)

GeM is a one-stop-shop for the online procurement of common-use goods and services required by numerous government departments, organisations, and public sector units. GeM intends to improve openness, efficiency, and speed in government procurement. It also includesfacilitiesfor direct purchase, e-bidding, and reverse e-auction to help government users get the most bang for their buck. The portal allows all parties to register online, including government users, product sellers, and service providers.

Advantages for buyers on GeM