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Direct money transfer vs digital payments

: Which is safer and better? Pros and cons to know

COVID-19 has changed the way consumers look at payment options. Businesses are adapting to make payment transactions fast and safe for both customers and associates.

Direct Money Transfer ( DMT) is one of the first set of internet banking solution which was launched more than a decade ago and it was the first initiative to decongest the bank branching and allow partners and retailers to participate in the cash deposit into banking accounts. This was also one of the key drivers for financial inclusion. The digital payments is the next level of paradigm shift in the payment landscape. These digital payment deliver an easier and simple experience, exploiting ubiquitous customer technology such as smartphones whilst eliminating the need for cumbersome peripherals like card readers. The Digital payments in a simple definition is nothing but an evolution of technology providing  customers a frictionless experience.


  1. Money Transfer that happens thru IMPS, NEFT, RTGS would be called Direct Money Transfer
  2. To do DMT one has to follow multiple steps – logging into the account using user ID and password, and finally providing second factor authentication (OTP).
  3. For peer-to-peer transactions one requires you to add a beneficiary to your account with all their details like bank account number, bank name and IFSC code. It might then also take some time to activate the beneficiary.
  4. DMT may also involve transfer of cash to any beneficiary bank account apart from bank to bank transfer.
  5. All transactions attract payment gateway charges.


  1. With UPI, you just need to input your UPI ID, which leads to a payment request being sent to your UPI app. Login and approve the payment by entering your PIN.
  2. With UPI, you can transfer funds without adding a beneficiary.
  3. UPI payment can be done using QR code when u scan the QR code using your UPI add and enter you PIN for your transaction.
  4. UPI transaction can be done directly to a recipients Mobile number
  5. Even if the recipient is not active on the UPI platform, you can make the fund transfer instantly using only their account number and IFSC code.
  6. With merchant UPI transactions, up to ₹ 2,000 do not attract any payment gateway charges.

Factors contributing to the growth of digital payments

  • Improved mobile and internet penetration.
  • Regulatory and Government Intervention
  • Tech savvy millennial population
  • Innovative products and platforms.


  1. Both are safe transactions.
  2. Both have checks and balances.
  3. Both involve the respective bank accounts
  4. DMT has still some level of friction for completing a transaction and does not provide delight to the customer.
  5. Overall The simplicity of a  UPI is that you can complete the process in just a few steps. Fewer steps also means less friction and less time taken to make a transaction go through.
  6. Also As long as there is no additional charge on making a UPI transaction, it appears to be better in terms of ease and simplicity as well.

By: S Anand, the Chief Executive Officer and Co-Founder of PaySprint, a Fintech venture focussed on Next Gen Neo Banking Solutions, offering a Unified Open API Platform.

About Mahender Bansal

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