The days of writing cheques were long past passe. Till recently, the easiest way to transfer money was through Internet or phone banking. The entire process took another step forward last week—now you can transfer money through your cellphone.

The National Payments Corporation of India (NPCI) has launched an inter-bank mobile payment service (IMPS), which will enable savings account holders to transfer money to another account within the country using their cellphone.

Illustration: Jayachandran/Mint

Is it available to all?

To avail the facility, it is mandatory that the bank in which you hold an account and the one in which the beneficiary has an account are linked to the IMPS. Currently, seven banks have gone live with the system— State Bank of India, ICICI Bank Ltd, Union Bank of India, Bank of India, HDFC Bank Ltd, Axis Bank Ltd and Yes Bank Ltd. Seven more are in the process of going live and several others are in the preliminary phase.

“Just like you can use your debit card in the ATM machine of almost any bank now, one will eventually be able to transfer money to account holder of most banks, as more and more banks join the network," says Suresh Sethi, group president (transaction banking), Yes Bank.

What you need

The first step is to get yours as well as the beneficiary’s cellphone number registered with the respective banks.

As with any financial transaction, the sending side needs to be more secure than the recipient. The sender, thus, needs to register for mobile banking and acquire his mobile personal identification number (MPIN) as well as MMID (mobile money identity) number. The first four digits of an MMID is the bank’s identification code; each account has a unique MMID and cellphone number combination. So, while each cellphone number can be linked to multiple bank accounts, for each account you will have a unique MMID.

The recipient, however, need not be a mobile banking customer; linking his mobile number to his bank account and getting an MMID is enough to enable the number to receive money through a cellphone.

Modes of transfer

There are two ways to do it—by downloading an application on your cellphone or by simply sending an SMS.

Download version: To download the application, you would require a GPRS or a Java-enabled cellphone. While some banks will have this application on their website, in others, you may need to visit the branch or an authorized cellphone dealer and get it downloaded on your phone. It would depend on the bank.

Since transactions done though an application are encrypted, they are considered safe. You can transfer up to 50,000 per day per person through the download version, according to the Reserve Bank of India (RBI) guidelines. You may transfer money to as many people as you want, but the total amount cannot exceed 50,000.

This version is available with all banks registered with NPCI.

SMS version: Sending money through an SMS is relatively simple, but may not be safest mode since transactions done though an SMS are not encrypted and hence can be read by anyone. Therefore, RBI has set an upper limit of 1,000 per person per day on money transfers through an SMS.

As of now, only two banks— Union Bank of India and Bank of India—will allow money transfers through SMS, according to NPCI.

Each bank will have it’s own security criteria in terms of SMS and MPIN verification.

How to transfer

You will just need the recipient’s MMID and cellphone number. You won’t need his name, bank account number, bank address or any other details. Once you initiate the transaction, your bank will verify your MMID and MPIN and check if you have sufficient balance in your account to complete the transaction.

You will then get an SMS alert from your bank, stating that the amount has been debited from your account. Your bank will then route the funds to the recipient’s bank through a clearing house.

The recipient’s bank will verify his MMID and cellphone number and credit the amount to his account. “Since we are looking at a unique 17-digit combination, the chances of money being credited to a wrong account due to an error while typing out the MMID or cellphone number are minimal," says M. Balakrishnan, chief operating officer, NPCI.

You will then get a second SMS informing you that the transaction has been completed. The recipient, too, will get an SMS stating the amount has been credited to his account.

All this happens real time. So the transaction gets completed in a few seconds or at the maximum, a few minutes, in case the messages don’t go through on time. “We have seen that so far the transactions have all gone through in a few seconds as promised, but sometimes the SMS is not delivered on time. Besides, IMPS transactions can be processed 24x7," says Balakrishnan.

If the transaction is not processed for any reason, the money is credited back to the sender’s account.

What it costs

According to an RBI mandate, all banks will offer IMPS facility free of cost till 31 March 2011. “Today depending on various factors, remittances and money transfers attract a wide range of charges. After 31 March, banks could levy charges, but this model is still in a nascent stage and, hence, it is too early to say anything," says Sethi.

The road ahead

The launch is in line with the objective of financial inclusion. At the inauguration ceremony on 22 November, RBI deputy governor Shyamala Gopinath acknowledged the success of mobile penetration in India, saying: “The mobile phone offers a greater opportunity for effective delivery of financial services and furthering the cause of financial inclusion in a significant way."

India has a huge migrant population—this system will make it convenient for them to remit money to their families. “Mobile to mobile transfers will ensure that they don’t have to travel a distance to reach a bank branch or an ATM. In fact, if his bank provides the facility, the remitted money can also be converted and saved on the mobile e-wallet as digital money," says Sethi.