IMPS – NFET – RTGS – Payments

Types of Payment Systems

1. A payment system settles financial transactions between payers and beneficiaries. Flow of funds in a payment system in general involves either movement of funds from one account³ to another or loading of cash to an account or withdrawal of cash from an account. For this discussion paper, payment systems in India are categorised into two types –

i. Funds Transfer Payment Systems – System facilitating transfer from one account to another account identified by originator customer [what we call as Person-to-Person (P2P) transaction]; and

ii. Merchant Payment Systems⁴ – System facilitating payments for availing goods or services⁵ [what is known as Person-to-Merchant (P2M) transaction].

2. Funds Transfer Payment Systems: Real Time Gross Settlement (RTGS), National Electronic Funds Transfer (NEFT) and Immediate Payment Service (IMPS) are the main exclusive funds transfer payment systems in the country.

3. Merchant Payment Systems: Card networks and PPI issuers provide important merchant payment systems in the country. Their features include:

i. Card networks: They facilitate the issuance of card-based products like credit cards, debit cards and prepaid cards. Card network payment system can be a three-party or a four-party settlement system. Card payment system can also facilitate funds transfer from one card to another; however, they primarily function as a merchant payment system.

ii. PPIs: These are issued both by banks and non-banks. Banks issue them as one of the business segments in their bouquet of products. Non-bank PPI issuers are standalone operators of this product. After the permission granted to non-banks to issue cards in affiliation with card networks, most of the card issuing non-bank PPI issuers are issuing cards in association with authorised card networks.

4. Unified Payments Interface (UPI) is a very popular funds transfer system, which is quite convenient and fast. RTGS and NEFT also facilitate merchant payments; but these are not popular channels for daily purchase of goods and services as – (a) RTGS is a large value payments system and is mainly used for business-to-business payments; and (b) NEFT is not an immediate payment system and confirmation of receipt of funds in the merchant’s account takes time. UPI, unlike these, facilitates immediate credit with real-time confirmation.

Extract from: https://rbi.org.in/scripts/PublicationsView.aspx?Id=21082

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