Evolution of India’s Digi Payment Ecosystem: Stage II

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To read Part I, Click here

Various systems are currently in place to meet remittance requirements.

The National Electronic Funds Transfer (“NEFT”) began its journey only in 2005 as a local Electronic Funds transfer system, it later expanded to cover larger areas. At present, NEFT acts as a nation-wide payment system and facilitates one-to-one funds transfer. Individuals, firms or corporates can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country participating in the scheme. NEFT resulted in cost-effectiveness, near real-time transfer of funds to a beneficiary account in a secure manner and removed the need for physical cheque/ Demand Draft to the beneficiary, as also the need to visit his/ her bank for depositing paper instruments. There are not too many systems of comparison even in other countries. RBI strives to improve the efficiency of this payment system. NEFT functioned in work hours.

Immediate Payment Services (“IMPS”) was introduced by the National Payment Corporation of India (“NPCI”) in 2010 to solve the challenge of transferring funds real-time and interbank 24*7*365. Thus IMPS provides a robust and real-time fund transfer offering instant 24*7 interbank electronic fund transfer accessible on multiple channels including mobile internet, ATM, SMS, Branch and USSD. Even PPIs (to be discussed in the next post) are live on IMPS. IMPS had had 416 banks and 26 non-bank PPI issuers participating therein as on December 31, 2018.[1]

Real Time Gross Settlement system (“RTGS”) is a system facilitating continuous real-time settlement of fund-transfers, individually on a transaction basis (without netting). In this system, instructions are processed at the time they are received and settlement of fund transfer instructions occurs individually. It offers a safe mode of transfer with no amount cap and on all bank working days. Remitter can initiate remittance from anywhere utilizing internet banking. While NEFT involves processing of transactions received up to a particular time in batches, RTGS processes transactions continuously on a transaction by transaction basis throughout the RTGS business hours.

The ubiquity of mobile phones, combined with cost efficiency in their usage, has led to an increase in the number of mobile internet users. Taking advantage of this, an increasing number of payment facilities are being integrated through the mobile channel.

Aadhaar Enabled Payments System (“AEPS”) was introduced for purposes of facilitating financial inclusion. It uses Aadhaar for beneficiary identification and authentication in payments. It facilitates operation from Aadhaar seeded bank accounts using biometric authentication of customers. Today, AEPS is increasingly used and in an interoperable manner with customers of other banks.

Aadhaar Payments Bridge System (“ABPS”) was introduced to facilitate bulk and repetitive government benefit payments and subsidy payments to Aadhaar seeded bank accounts of the abovementioned beneficiaries. NPCI manages ABPS through the accredited government banks and sponsor banks of the NACH.

Part III will address Card Payments, Card not present payments, PPIs, payment wallets and norms governing these.

MANAL SHAH


[1] https://rbi.org.in/scripts/PublicationReportDetails.aspx?UrlPage=&ID=918 (last accessed on March 08, 2019).

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