IMPS vs. UPI in Banking
The term “IMPS” stands for ‘Immediate Payment Service.’ It is a secure and immediate interbank electronic fund transfer service that enables users to access their bank accounts and transfer money.
The National Payments Corporation of India launched the UPI (Unified Payments Interface) payment system. Customers can use UPI to pay directly from their bank accounts to various merchants, online and offline, without typing credit card numbers, IFSC codes, or net banking/wallet passwords.
Following the cashless economy, the NCPI launched this payment system to encourage cashless transactions and make mobile-based payments more convenient. Both UPI and IMPS support e-commerce transactions. UPI and you can use IMPS to conduct B2B or B2C transactions.
The question is, what makes UPI better? This question is especially relevant when comparing UPI to Immediate Payment Service (IMPS), which provides similar features and benefits to the UPI app.
Security
In comparison to IMPS, UPI provides a more secure payment transfer method. It is because, unlike IMPS, only a few details are entered when initiating a transaction. However, in the case of IMPS, bank account information is entered, which is risky on an unsecured network. At the moment, both IMPS and UPI are chargeable above a certain threshold (usually above Rs.1000). There are different charges for IMPS depending on the bank. The transaction charge for UPI, on the other hand, is expected to range between Rs.0.50 and Rs. 1.00, according to the RBI.
The UPI app is paving the way to a cashless economy in the coming years. It has numerous benefits and provides the customer with safety and security when transacting compared to IMPS.
The Difference Between UPI and IMPS
To better understand both fund transfer systems and determine which is superior, let us first define each of them. An MPIN number is an MPIN to authenticate UPI payments. MPIN is a four or six-digit number that the user enters to authenticate a payment. In contrast, IMPS transactions require OTP (one-time-password) authentication. An OTP is sent to your mobile phone once you verify and authenticate the payment.
To complete an IMPS transaction, you must enter a long and complicated set of information, such as your name, bank account number, IFSC code, and so on. It is usually inconvenient for users. In comparison, the UPI transaction is an easy process that requires only the payee’s Virtual Payment Address (VPA).
For example, instead of making an IMPS fund transfer to Arun Iyer at XYZ bank, XYZ branch with IFSC code XYZ09865, one can do the same with UPI with just ArunRahal@xxxbank.
When making an IMPS transfer, the account holder must install the app for debiting. On the other hand, UPI provides the flexibility of linking multiple bank accounts from the same app. It decreases the need for storage space when downloading apps from multiple banks, which is useful if you have different bank accounts. Also, money can be transferred to other countries using the IMPS method. However, at the moment, UPI does not support international money transfers. At the moment, UPI transactions are only available within India.
Hence, for a UPI transaction, everything you require is a Virtual Payment Address (VPA). However, IMPS requires the account holder’s name, bank name, bank branch, the IFSC code, and the user’s account number. Not only that but if a payment is made to a payee for the very first time, they must first be included as a beneficiary. However, this is not the case with UPI. The process of adding beneficiaries to IMPS is time-consuming.
Why Is UPI Better?
UPS is preferable because, while IMPS offers instant money transfers, it takes longer than UPI. Money transfer occurs after registering a new payee and waiting thirty minutes to transfer the money to the new payee. In comparison to IMPS, a UPI payment is made to a new payee without the need for payee registration or a waiting period.
UPI offers the one-of-a-kind choice of requesting money collection. Your money request message can be sent to people who owe you cash. In the long run, this increases financial integrity. On the other hand, IMPS does not allow you to request money. There is only one option for transferring to payees that are registered.
Customers can equally make collect requests: UPI gives them the one-of-a-kind choice of adding a collect request form for payment. Through the app, you can send a collection request to the person who owes you cash, and you can also set a deadline for the money to be paid. UPI does not have transaction fees like IMPS, and the UPI app allows users to link all of their existing bank accounts to one app. As a result, users do not need to download multiple apps for various bank accounts.