The Best Payment Method For Low-Value Transactions
Updated: May 13
The introduction of the Unified Payments Interface (UPI) Lite has sparked a new debate on the effectiveness of wallet payments versus payments done directly on banks’ Core Banking Systems (CBS) for processing low-value high-volume transactions.
In recent years, there has been a surge in digital payments, primarily driven by the increasing use of mobile devices and the growth of e-commerce. This has led to the emergence of wallet platforms and the expansion of banks’ Core Banking Systems (CBS) as the two primary means of processing low-value, high-volume transactions.
While both methods are designed to facilitate efficient and secure transactions, there are key differences between the two that can impact their effectiveness in certain contexts.
Digital Wallet Platforms vs. CBS
Wallet platforms are digital payment platforms that allow users to store, manage, and transfer funds from one account to another. Examples of wallet platforms include PayPal, Venmo, Apple Pay, and UPI Lite. These platforms typically require users to link their bank accounts or credit cards to their wallet account, allowing them to make payments from their wallet balance.
On the other hand, CBS is a centralized system banks use to manage their core banking functions, such as account management, transaction processing, and customer relationship management. CBS is designed to handle a wide range of banking activities, including deposits, loans, and investments, and is typically used by banks to manage their day-to-day operations.
Effectiveness of Digital Wallet Platforms
Mobile Wallet platforms are particularly effective for low-value, high-volume transactions. They are designed to process payments quickly and securely, making them ideal for e-commerce transactions and person-to-person (P2P) transfers. Wallet platforms typically offer faster processing times and lower transaction fees compared to traditional bank transfers, making them an attractive option for consumers and merchants alike.
Additionally, wallet platforms often have user-friendly interfaces and advanced security features, such as two-factor authentication and encryption, which enhance the security of transactions. These features can help reduce the risk of fraud and unauthorized access to user accounts.
Effectiveness of CBS
While CBS is not designed specifically for low-value, high-volume transactions, it can still be an effective means of processing these types of transactions. CBS is highly secure and reliable, with robust fraud detection and prevention measures built in. Additionally, CBS can handle various banking activities, making it a versatile solution for banks looking to manage their day-to-day operations.
However, CBS can be slower and more expensive than wallet platforms when it comes to low-value transactions. CBS typically charges higher transaction fees and may take longer to process transactions, making it less attractive to consumers and merchants looking for a fast and affordable way to transfer funds.
In conclusion, both digital wallet platforms and CBS can be effective for processing low-value, high-volume transactions, depending on the context.
Wallet platforms are ideal for e-commerce transactions, P2P transfers, and low-value P2M transfers offering faster processing times and lower transaction fees than traditional bank transfers.
On the other hand, CBS is a highly secure and reliable solution for banks looking to manage their core banking functions. However, it may be slower and more expensive than wallet platforms for low-value transactions.
Ultimately, the choice between mobile wallet platforms and CBS will depend on the specific needs of the user or bank. It is important to carefully consider the features, costs, and security measures of each option before making a decision