Payment modes for the online transaction

By Annapoorna


Updated on: Jan 21st, 2022


4 min read

social iconssocial iconssocial iconssocial icons

Over the last decade, online transactions have grown significantly due to the rise and spread of the internet and subsequently internet-based shopping and banking.

As we advance further with innovative technology, we will continue to grow online payment systems and processing devices.

What does online payment mode mean?

An online payment mode refers to making transactions for paying goods or services via an electronic medium, without using cash or cheque. It’s also referred to as an e-payment system or electronic payment system.

Advantages and disadvantages of online payments

Online payment methods come with a host of benefits, such as:

·      Global Reach – Your business can reach more customers not just domestically but from around the world, which could consequently increase your sales.

·      Efficient and Effective Transactions — As the transactions are completed within seconds with just a click of a button, without wasting any time, this mode offers speed along with simplicity.

·      Convenient – A customer can pay for his purchase on any e-commerce portal from anywhere and at any time. All he needs is an internet-connected device.

·      Cost-effective – Online payments are cost-effective as there are very basic charges involved, like a data charge and a phone.

·      Tracking and Controls -A customer can always track his payment and check their balances and any transaction through their virtual account, which holds the customer’s transaction history.

·      Scalability – With e-payment mode, you can easily add them to your websites and start processing and collecting payments online.

·      Security – Payment providers and payment gateways provide best-in-class security and anti-fraud tools for ensuring your transactions are reliable.

Online payments do sound great, but there are a few drawbacks:

·      e-Commerce Frauds – e-Commerce fraud is one of the key concerns while using online modes of payment. However, adhering to security rules and regulations shouldn’t be a problem. If merchants select payments systems that aren’t highly secure, there’s a risk of a data breach that could lead to identity theft.

·     Reliability – Dependency on telecommunication infrastructure such as the internet and servers at the time could disable online payments when there’s a severe or network outage.

Types of payment modes for online transaction

There are several ways for doing online transactions, but below are a few popular ones that are commonly used:

NEFT – NEFT or National Electronic Funds Transfer is a popular payment method that facilitates the one-to-one transfer of funds. With the help of NEFT, individuals can transfer funds electronically from any bank to the account of a person within the same bank or any other bank. The fund transfers using NEFT mode mustn’t be real-time, and the transaction is settled in different half-hourly batches. There’s no minimum and maximum amount assigned for NEFT Transactions. However, banks can have their maximum limits. For example, HDFC Bank has an NEFT transfer limit of Rs.25 lakh/day for each customer ID.

RTGS – Real-Time Gross Settlement or RTGS is another mode of online payment where the fund is credited to the receiver’s bank account in real-time. This mode of electronic payment is mainly for high-value transactions requiring immediate clearing. The minimum amount which can be remitted via this mode is Rs.2 lakh, and there’s no upper ceiling.

IMPS – IMPS or Immediate Mobile Payment Services is an instant inter-bank transfer system managed by NCPI (National Payment Corporation of India). With IMPS, you can instantly transfer lower amounts, up to Rs.2 lakh, even if you just have the receiver’s phone number, which is linked to a bank account. IMPS is a fund transfer mode that offers the best features of both NEFT and RTGS.

NACH – NACH or National Automatic Clearing House is again an NPCI initiative that facilitates high interbank volume and low-value transactions electronically that are repetitive using the NPCI service. NACH is an improvement over the existing ECS (Electronic Clearing System) and helps in consolidating multiple ECS systems across the country. NACH is implemented to be a centralised system for government, corporate and financial institutions offering a web-based solution and facilitating interbank, high volume electronic transactions.

About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more


Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use


ISO 27001

Data Center


SSL Certified Site

128-bit encryption