Immediate Payment Service (IMPS); Unified payment interface (UPI)

Immediate Payment Service (IMPS) and Aadhaar Enabled Payment System (AePS) in India

India's digital payment landscape is rapidly evolving, with services like IMPS and AePS playing a crucial role in promoting financial inclusion and seamless transactions.

Immediate Payment Service (IMPS)

What is IMPS?

• IMPS is an instant, 24/7, interbank electronic fund transfer system in India.
• It allows for real-time transfer of funds between bank accounts using mobile phones, internet banking, and ATMs.
• The National Payments Corporation of India (NPCI) launched IMPS in 2010.
• It was initially piloted with State Bank of India, Bank of India, Union Bank of India, and ICICI Bank.

Key Features:

• Instant Transfers: Funds are transferred immediately.
• 24/7 Availability: Available round the clock, including bank holidays.
• Interbank Transfers: Enables transfers between different banks.
• Multiple Channels: Accessible via mobile phones, internet banking, and ATMs.
• Secure Transactions: Uses secure authentication methods.

How it Works:

• Users can initiate transfers using their mobile banking app, internet banking portal, or by visiting an ATM.
• The transaction is processed instantly through the IMPS network, and the beneficiary receives the funds in real-time.

Significance:

• IMPS has significantly contributed to the growth of digital payments in India.
• It provides a convenient and efficient way to transfer funds, eliminating the need for traditional methods like cheques.
• It supports quick, easy, and secure transactions.

Aadhaar Enabled Payment System (AePS)

What is AePS?

• AePS is a bank-led model that enables online interoperable financial inclusion transactions at Point of Sale (Micro ATM) terminals.
• It utilizes Aadhaar authentication to verify the customer's identity.
• It is designed to bring banking services to the unbanked and underbanked populations.

Key Features:

• Aadhaar Authentication: Uses Aadhaar number and fingerprint for authentication.
• Interoperable Transactions: Allows transactions across different banks.
• Financial Inclusion: Extends banking services to remote areas.
• Micro ATMs: Uses small, portable devices for transactions.

Services Offered:

• Cash Deposit: Allows customers to deposit cash into their bank accounts.
• Cash Withdrawal: Enables customers to withdraw cash from their accounts.
• Balance Enquiry: Allows customers to check their account balance.
• Mini Statement: Provides a summary of recent transactions.
• Aadhaar to Aadhaar Fund Transfer: Enables fund transfers between Aadhaar-linked accounts.
• Authentication: Authenticates customers for various financial services.
• BHIM Aadhaar Pay: Enables merchants to accept payments using Aadhaar authentication.

How it Works:

• A customer visits a Micro ATM terminal operated by a banking correspondent.
• The customer provides their Aadhaar number and selects the desired transaction.
• Their identity is authenticated using fingerprint verification.
• The transaction is processed, and the customer receives confirmation.

Unified Payments Interface (UPI) in India

The Unified Payments Interface (UPI) has revolutionized digital payments in India, rapidly bridging socioeconomic and digital divides. While its growth is phenomenal, addressing concerns about reliability and security is crucial.

What is UPI?

• UPI is an instant real-time payment system developed by the National Payments Corporation of India (NPCI).
• It facilitates inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions through mobile devices.
• It's an advanced version of the Immediate Payment Service (IMPS), offering faster, simpler, and more seamless cashless transactions.
• UPI integrates multiple bank accounts into a single mobile application, enabling smooth fund routing and merchant payments.

Key Points

• NPCI, which operates various payment systems like NACH, IMPS, AePS, BBPS, and RuPay, manages UPI.
• Popular UPI apps include BHIM (government-backed), PhonePe, Google Pay, Amazon Pay, and Paytm.
• India's UPI is being integrated with Singapore's PayNow for cross-border transactions.
• UPI was launched in 2016 with 21 member banks.

Achievements

• UPI transactions experienced significant growth during the COVID-19 pandemic.
• In October 2021, UPI's transaction value exceeded USD 100 billion in a single month.
• The Indian digital payments market is projected to grow from Rs. 2,153 trillion to Rs. 7,092 trillion by 2025.
• Growth is driven by merchant payments, government initiatives (Jan Dhan Yojana), data protection bills, MSME expansion, millennial adoption, and high smartphone penetration.

Challenges

• Increased risk of cybercrime in the banking and financial services sector due to the pandemic.
• Specific challenges include:
  • Fraudulent claims
  • Chargebacks
  • Fake buyer accounts
  • Coupon and promotion abuse
  • Account takeover
  • Identity theft
  • Theft of card details
  • Triangulation frauds.

Way Forward

• A well-crafted Public-Private Partnership (PPP) strategy is essential for enhancing digital infrastructure, access, and literacy.
• Digital empowerment through public policy can foster responsible digital behavior.
• Increased security measures and public awareness campaigns are needed to reduce fraud.
• Constant updating of security protocols, and fraud detection AI, are needed to stay ahead of bad actors.
• Continued focus on user education and support to build trust in the system.

In Simple Terms:

Imagine UPI as a super-fast and easy way to send and receive money using your phone. It's like having all your bank accounts in one app, allowing you to pay anyone instantly, whether it's a friend, a shopkeeper, or an online store.

Why is it so popular?

• Speed: Transactions are instant.
• Convenience: You can pay from anywhere, anytime.
• Accessibility: It's widely available on smartphones.
• Simplicity: It's easy to use.

What are the concerns?

• People worry about security and fraud, especially with increasing cybercrime.

What needs to be done?

• The government and private companies need to work together to make UPI even safer and more accessible.
• Educating users about safe digital payment practices is very important.
• Constant improvements to security are needed.