Merchant payments in India have come a long way, shaped by technology, regulations and changing customer habits. For businesses, keeping up with these shifts isn’t just an option—it’s a necessity. A well-structured payment system ensures smoother transactions, a better customer experience and financial security. But with so many options available, how do you decide what works best? From digital payments to traditional methods, businesses need to find the right balance.
This blog discusses the different types of merchant payments and how they impact business operations. Whether you’re just starting out or looking to upgrade your payment process, understanding these options can make all the difference. After all, nowadays, the way you accept payments can shape your success.
Meaning of merchant payments
A merchant payment refers to the process through which businesses accept payments from customers in exchange for goods or services. These payments can be facilitated through multiple channels, including cash, digital wallets, card transactions and bank transfers. In the context of online and in-store transactions, merchant payments rely on sophisticated financial technologies, including payment gateways and acquiring banks, to process and settle payments efficiently.
To facilitate these transactions, businesses require a merchant account. Understanding the meaning of merchant accounts is fundamental for any enterprise looking to accept digital payments. A merchant account is a type of bank account that enables businesses to receive payments via debit or credit cards and other digital methods. The funds collected through customer transactions are temporarily held in the merchant account before being transferred to the business’s primary bank account.
Types of merchant payments
The various types of merchant payments are:
1. Card payments
Card payments are one of the most prevalent forms of merchant payment in India. Businesses can accept payments through debit and credit cards issued by banks and financial institutions. These transactions are processed via a payment gateway like Plural by Pine Labs, which ensures secure and compliant processing.
- Credit card payments: Allow customers to make purchases using borrowed funds from their issuing bank.
- Debit card payments: Directly deduct funds from the customer’s bank account at the time of purchase.
- Contactless payments: Enabled through Near Field Communication (NFC) technology, allowing faster transactions with a simple tap of the card.
For businesses, integrating our payment gateway, Plural by Pine Labs, ensures smooth and secure card payment processing, backed by Plural Tokeniser for 100% RBI-compliant saved card transactions, reducing fraud risks and transaction failures.
2. UPI payments
Unified Payments Interface (UPI) has revolutionised digital transactions in India, offering a real-time, interoperable payment system. UPI payments allow customers to transfer funds directly from their bank accounts using mobile applications.
- UPI ID-based payments: Customers use a unique UPI ID linked to their bank account for instant transfers.
- QR code payments: Merchants generate a QR code that customers scan using their mobile payment apps for quick transactions.
- UPI AutoPay: Plural by Pine Labs enables businesses to seamlessly collect recurring payments via UPI AutoPay, ensuring a hassle-free experience for subscription-based services.
UPI has gained immense popularity among Indian businesses due to its low transaction costs and seamless integration with e-commerce and offline retail systems.
3. Net banking payments
Net banking allows customers to make payments directly from their bank accounts via online banking portals. This method is particularly useful for high-value transactions and business-to-business (B2B) payments. Businesses benefit from net banking due to its reliability, high transaction limits and real-time settlement capabilities.
4. Digital wallets
Digital wallets, such as Paytm, PhonePe and Google Pay, have become a mainstream mode of merchant payment in India. These wallets store funds that customers can use to make purchases, both online and in physical stores.
- Closed wallets: Issued by businesses for specific transactions (e.g., Amazon Pay).
- Semi-closed wallets: These can be used across multiple merchants but do not permit cash withdrawal.
- Open wallets: Linked to bank accounts and allow withdrawals, like Paytm Payments Bank.
Digital wallets offer convenience, faster checkouts and enhanced customer engagement through loyalty programmes and cashback offers.
5. Bank transfers and IMPS/NEFT/RTGS payments
Businesses also receive payments through bank transfers via Immediate Payment Service (IMPS), National Electronic Funds Transfer (NEFT) and Real-time Gross Settlement (RTGS). These payment methods are primarily used for B2B transactions, high-value purchases and supplier payments.
- IMPS: Real-time transfers, available 24/7.
- NEFT: Settles transactions in batches, suitable for scheduled payments.
- RTGS: Used for large-value transactions, offering real-time processing.
While these methods are secure and widely accepted, they require manual intervention, making them less seamless compared to automated payment options.
6. Buy now, pay later (BNPL)
The merchant payment scenario has also seen the rise of BNPL services, allowing customers to make purchases instantly while deferring payment over a predetermined period. This model has gained traction in India, particularly in high-ticket retail and in-store purchases. With our PoS systems, businesses can seamlessly offer pay later EMIs, enabling instant approvals in less than 30 seconds, accepting debit/credit/NBFC cards and requiring no paperwork.
Additionally, exciting cashback offers across 15+ banks and 100+ brands enhance customer experience, helping businesses attract more shoppers, reduce cart abandonment and boost in-store sales.
Choosing the right merchant payment solution
Selecting the most suitable merchant payment solution depends on multiple factors, including business model, customer preferences and transaction volume. Here are key considerations:
User experience: Seamless, error-free transactions enhance customer satisfaction.
Security and compliance: Ensuring adherence to RBI guidelines and data protection regulations.
Transaction costs: Evaluating fees associated with different payment methods to optimise costs.
Integration capabilities: Compatibility with existing PoS systems, accounting software and e-commerce platforms.
Settlement speed: Faster fund transfers improve cash flow management.
The role of merchant accounts in payment processing
To efficiently manage merchant payment transactions, businesses require a merchant account. Understanding the meaning of merchant accounts is crucial as it directly impacts payment processing and cash flow.
A merchant account acts as an intermediary between the business and the customer’s bank. It temporarily holds the transaction amount before transferring it to the business’s primary bank account. This setup helps businesses process multiple payment methods while ensuring security and regulatory compliance.
Key benefits of a merchant account:
- Enhanced security: Protection against fraud and chargebacks.
- Multiple payment options: Acceptance of cards, UPI, wallets and EMI-based payments.
- Faster settlements: Efficient fund transfers improve liquidity.
- Regulatory compliance: Ensures adherence to financial and taxation laws in India.
Future-proof your business with Pine Labs
Understanding the diverse types of merchant payment options available in India is essential for businesses aiming to provide seamless and secure transactions. Whether it’s card payments, UPI, net banking or buy now pay later, each method offers distinct advantages suited to different business models.
With Pine Labs’ PoS systems and Plural’s payment solutions, businesses can effortlessly integrate Pay Later EMIs, UPI AutoPay and secure card transactions, ensuring a smooth checkout experience for customers. Moreover, a strong grasp of merchant accounts helps optimise payment processing for efficiency and compliance. As digital payments continue to evolve, leveraging our innovative solutions will be key to staying ahead. Learn more at https://www.pinelabs.com/