National Payments Corporation of India (NPCI), the body that monitors and governs IMPS (Immediate Payment Services) transactions in India, released data that explains the increasing adoption of IMPS service among the people. The number of IMPS transactions between April and May 2016 were up by 5.34%, totalling 31.09 million transactions. Subsequently, the total number of MMID (Mobile Money ID’s), required to send money to a person instantly using beneficiary’s mobile number, also went up by 6.92% during the same period, to 1343 lacs.
The rise in internet penetration and mobile phone users in India is a clear indication towards the booming IMPS service. There was a steep rise of 112.43% in the total number of IMPS transactions that took place between May 2015 and 2016. Mobile Money ID’s (MMID) also recorded a 49.49% rise between May 2015 and May 2016. 164 banks opted to offer IMPS service by the end of May 2016, a 78.26% increase from May 2015 when only 92 banks were offering the service.
But not everything looks promising for IMPS; one must have a bank account in order to transact through IMPS. The World Bank reported that in India only 400 million Indians had a bank account in 2013, between 2011 and 2014 only 175 million new accounts were opened. In contrast, In the last 18 months, nearly 220 million new accounts are opened under the under Pradhan Matri’s Jan Dhan Yojana, reports Economic Times citing official data. Still more than half of India population is yet to establish any relationship with banks. Online banking, therefore, is still a futuristic approach for the majority of Indians who are yet to have their first bank account and a sizable chunk of the population is still below poverty line.
Mobile banking share in India is very low at 0.1% of the total banking share and is slated to rise to 10% in 7 years, recording a 200X jump. NEFT and PPI (wallets etc.) payments in the country account for less than 10% of the total banking transactions and is estimated to swell to 30% in the next 7 years.
The adoption rate of IMPS service is increasing at a rapid rate citing those numbers and why not? IMPS allows immediate money transfer between two accounts. The distinctive traits about this feature are that IMPS transfers can be made around the clock throughout the year even on the public holidays, unlike the time-consuming and limited NEFT and another kind of transactions. SBI (State Bank of India) being an exception only allows the transactions between 8 AM and 8 PM through IMPS.
The transactions are safe and secured and can be conducted in 3 different ways: Firstly, Peer to Peer (P2P) by using the mobile number and MMID, Secondly, Peer to Peer (P2P) using IFSC and account number and lastly, IMPS merchant payment – Person to Merchant.
The rising Internet And Smartphone Penetration Helping Banking Industry
Internet penetration in India is growing at a serious pace. In 2015, the internet user-base in India recorded an impressive 40% growth over the past year. The total number of internet users in India is expected to rise to 462 million by the end of June 2016. Still in a country of 1.25 billion people, only 39% of the total population has access to the Internet.
The exploded adoption of the smartphone in India is also helping banks and financial industry to ride on the back of technology adoption by the people of India. Despite mere 17% smartphone penetration and declining growth in smartphone shipments globally, the smartphone shipments in India is estimated to grow by 29% in 2016. Encouraged by the growth figures, a majority of banks in India has made their indigenous apps available on smartphones for safe, secure and faster transfer from anywhere in the country.
The rising penetration of the Internet and Smartphone has surely boomed the adoption of mobile banking as it incorporates faster and easier way of money transfer, especially through the IMPS. Due to the changing business equation, banking users need faster processing of money transfer, consequently more number of account holders are turning towards IMPS, slowly ditching old school NEFT.
IMPS System Needs to Mature
But, not everything goes in the favor of IMPS in India. The system is yet in its early stage and needs to mature fast. Unlike RTGS/NEFT the IMPS transfers are not govern by RBI and banks do not have a universal policy to follow. While some of the banks, such as SBI, do not offer the service round the clock and on holidays, there are few banks which have a high number of failed IMPS transactions. But the most disappointing, not every bank offers the IMPS service in India.