IMPS is Five: Time to Tap Unrealized Potential

IMPS has shown rapid growth in these five years but its potential - especially as a more secure payment mode - is yet to be fully appreciated

Yesterday, Immediate Payment Service (IMPS) in India completed five years of its existence. It was on 22 November 2015 that National Payment Corporation of India had launched this real time money transfer service in association with some member banks.

IMPS, as the name suggests, enables immediate transfer of money between any two bank accounts, irrespective of the day and time. Unlike other popular money transfer services such as large value RTGS (real time gross settlement) and NEFT (national electronic fund transfer), IMPS works on non-banking hours and bank holidays. The money transfer too is immediate, unlike NEFT and RTGS, which work on the batch mode.

The phenomenal growth of this service has illustrated how badly the country needed the service. From INR 40 crore worth of total transactions just four years back (2011-12, the first full year of the service) to INR 58,190 crore in 2014-15, it a 1000% growth year on year (CAGR). And it is not exactly showing any sign of slowing down. In the first six months of the current financial year (April-September 2015), the value of transactions has already topped last year’s full year transaction value (see graph). 

Yet, its full potential is not really realized. That is because of the low awareness of its advantages. Most users do it because it allows them to transfer money immediately and on holidays and non-banking hours. In fact, despite knowing its advantages, many users still use NEFT on normal banking hours and turn to IMPS only when NEFT is not available.

In reality, a big advantage that IMPS has over other modes of payment is the ability to get money on one’s bank account without sharing the account number with anyone, making it invariably safer and more secure to receive money.

Another big advantage in the context of a country like India is that it enables money transfer using mobile phones that do not have a data connection. Using National Unified USSD platform (NUUP), it is possible to transfer money using USSD and SMS to a beneficiary account. That extends electronic funds transfer services to a large segment of users which are not tech savvy and/or do not have access to smartphones and data services.

To the uninitiated, IMPS works using what is called Mobile Money Identifier (MMID), a seven digit number issued by the bank when a user registers for the service. It is a one-time process. Most banks have very simple procedures to generate MMID. Usually, it is by SMS, on website, through mobile apps or using USSD. This MMID and mobile number are the only information that the beneficiary (payee) must share with the payer to receive money. So, the account number is protected from the payer, as in the case of paper cheques; just that it is instant.  

Usually, banks provision the MMID from the core banking system itself; the IMPS module sits between the CBS and the NPCI’s IMPS network. NPCI shares APIs of its system and the IMPS module is built using those APIs.

Though most of the promotion of IMPS services by banks project the MMID-based transfer, because of its unique ability to transfer money without having to know the account number of the payee, it is possible to transfer money using IMPS using account number and IFSC code too, using web, mobile banking, SMS or ATM channels.

A few merchants have enabled receiving payments through IMPS. The list includes largely bill-based payees but a few e-commerce/recharge type of applications have also been enabled.

IMPS marks a distinct phase in Indian payments. Payments can be from anyone, anytime, anywhere to anyone, anytime, anywhere—without exposing the account number.

Interestingly, many commercial users have started leveraging it to their benefit. Bajaj Auto Finance, for example, uses it to receive payments from its dealers, using its Union Bank of India account. PayPoint, Paytm use it for transferring money from their mobile wallets. E-commerce payments have also been enabled by merchants like PepperFry, eBay and Shopperstop. This is besides a host of P2M bill payments that are being enabled by many credit card companies, insurance firms, telcos and DTH operators.

Expect IMPS to move beyond the basic application to completely change the payment (and yes, online business) landscape in India.  

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