Test: Digital Payments Systems - UGC NET MCQ

• The Assertion is true as internet banking does indeed allow users to perform transactions anytime and anywhere.
• The Reason is false because internet banking is available 24/7 and does not require physical presence at a bank branch.
• Since the Reason is false, it cannot be a correct explanation of the Assertion.

To analyze the statements:

- Statement 1 is correct. Digital payments indeed provide a faster and more convenient way to conduct transactions compared to visiting a bank branch, which often involves waiting in lines and dealing with paperwork.

- Statement 2 is incorrect. In general, digital payment methods are associated with lower costs compared to traditional payment methods, as they often eliminate the need for physical infrastructure and reduce transaction fees.

Therefore, the only correct statement is Statement 1, making the correct answer Option A: 1 Only.

Digital payments refer to transactions conducted through electronic means, which remove the necessity for physical cash or checks. This includes various methods like mobile wallets, online banking, and card payments, providing convenience and efficiency in financial transactions. An interesting fact is that digital payments have rapidly gained popularity in recent years, especially in countries like India, where government initiatives have promoted cashless transactions for economic growth.

- Assertion (A) is true; a VPA is indeed crucial for UPI, providing a simplified way to conduct transactions.

- Reason (R) is false; a registered mobile number is mandatory for initiating UPI transactions, as it is linked to the bank account.

- Since the Reason does not support the Assertion, the correct option is Option C.

- The Assertion is true because mobile wallets like PayTM, Mobikwik, and PhonePe have gained immense popularity in India for facilitating quick and convenient digital payments.

- The Reason is also true, as mobile wallets function by allowing users to link their bank accounts and store money for transactions.

- The Reason directly explains the Assertion, as the ability to store money and link bank accounts is a fundamental aspect of the popularity of mobile wallets.

Banking cards, such as debit and credit cards, provide significant convenience for users by enabling various transactions across multiple platforms, including online payments, Point of Sale (PoS) terminals, and mobile applications. This versatility enhances the overall user experience, making financial transactions more accessible and efficient. An interesting fact is that the adoption of digital payment methods like banking cards has seen exponential growth in India, especially in the wake of initiatives to promote cashless transactions.

The Aadhaar Enabled Payment System (AEPS) provides various banking functionalities, including cash withdrawals and deposits. This system is designed to facilitate seamless banking transactions for individuals, utilizing the Aadhaar number for authentication. An interesting fact about AEPS is that it significantly increases financial inclusion, allowing even those in remote areas to access banking services using just their Aadhaar number linked to a bank account.

One of the primary advantages of digital payment methods is that they significantly reduce the risk of theft that comes with carrying cash. Digital transactions are generally more secure, as they involve encryption and authentication processes that protect users. Additionally, the convenience of making payments without the need for physical cash enhances the overall user experience. An interesting aspect of digital payments is the rise of technologies like Near Field Communication (NFC), which allow for contactless payments, further enhancing security and convenience.

Statement 1 is correct because digital payment services, such as PayTM, are designed to facilitate easy and quick payments for various utilities, enhancing user convenience.

Statement 2 is incorrect because digital payment methods often reduce costs associated with transaction fees and service charges, making them more economical than traditional banking methods.

Therefore, the correct answer is Option A: 1 Only.

- Assertion (A) is true; UPI indeed allows real-time fund transfers, significantly improving the efficiency of digital payments.

- Reason (R) is false; UPI transactions are available 24/7, not limited to banking hours.

- As the Reason is incorrect, it does not explain the Assertion. Therefore, the correct option is Option C.