What does National Payment Corp. of India do and what’s the future of payment system in India—cellphone, Internet or ATM?
This institution was set up on a vision of the Reserve Bank of India (RBI) to have an umbrella organization for all retail payments. Umbrella organization means being the central infrastructure for all retail payments other than RTGS (real time gross settlement)—be it cheque clearing, money transfer, electronic clearing service, electronic funds transfer, card payment system, cellphone payment system and the like.
The cellphone as a payment system will be the future.
Could you tell us about inter-bank mobile payment system (IMPS) in short?
IMPS is available 24x7 and (fund transfer through the cellphone) happens real time. Both the beneficiary and the sender get an SMS as confirmation of the transaction immediately. IMPS works on the existing infrastructure; therefore, the cost is minimal. Suppose you want to send funds to someone urgently in another city, you can send it immediately using IMPS and the receiver can go and withdraw the money at an ATM. Real-time money transfer is used by large business houses and companies through RTGS. Through IMPS, it’s like taking RTGS to retail customers.
AP Hota, Managing director and CEO, National Payment Corp. of India
Currently IMPS service is free of cost by banks. Will there be a cost in the future?
We charge 10 paise per transaction to the sending bank. For National Electronic Fund Transfer, banks charge a minimum of Rs5 for up to Rs25,000. With IMPS, the maximum limit (of money transfer) is Rs50,000, so the amount that banks may charge should be Rs2-3. For the first six to seven months, banks would like to offer the service free. How much the banks will charge has not been decided. But if they charge more than Rs5, it will not take off and the banks know it very well. So, it will definitely be less than Rs5.
How long will it be before we can use IMPS for retail payments and through multiple channels?
IMPS is at present confined to person-to-person payment. We have just got RBI’s approval for merchant payments— person-to-merchant and merchant-to-merchant payment. Person-to-person is relatively easy, but person-to-merchant will involve a good deal of work since it has to be integrated with the merchant system also. We will soon start with six pilot banks for person-to-merchant payments.
RBI has given us permission for channel integration too. That’s from cellphone to ATM and from ATM to Internet. Currently, if you want to send money through the Internet or ATM, you will have to punch in a whole lot of details such as bank name, branch name, account number and the like. Now we have permission to use the ATM or Internet channel to use MMID (Mobile Money Identity, a unique number you get when you register for IMPS) and mobile phone number as the identifier of the customer. This facility is yet to be rolled out.
How would it work?
When you go to an ATM, you will see a menu which will have an IMPS option. When you choose the IMPS option, you will have to punch in the mobile phone number, MMID and the amount of the sender, once you press enter, your account will get debited and the receivers’ account credited for the amount. So, (in the near future) you can send money through an ATM, if you do not want to send it using your cellphone through IMPS. This service is for those who are more comfortable with using an ATM instead of a cellphone. Even with Internet banking, you can use IMPS.
Banks are issuing MMIDs to every new customer, but very few of these are active. Will IMPS meet the same fate as no-frills account of not taking off, only active on paper?
Let me not compare IMPS with no-frills accounts. IMPS has been introduced to 10 million customers. You are right in saying that accordingly the volumes should pick up. But you may not have seen any advertisements. Most banks are waiting for a sizeable number of banks to join the system. Once that happens, they would go for an advertisement campaign. At present, 22 banks already offer this service and three more will go live in a week’s time; this will be a critical number for them to start the publicity campaign. Here customer education is the key.
What if there’s a grievance regarding IMPS?
The customer should approach his bank directly.