Inter-Bank Mobile Payment Service

The Inter-Bank Mobile Payment Service (IMPS) is an instant electronic funds transfer system that allows individuals and businesses to send and receive money across banks using mobile devices, internet banking, or ATMs. Introduced in India by the National Payments Corporation of India (NPCI), IMPS revolutionised the digital payments landscape by offering real-time transfer of funds 24×7, including on weekends and public holidays. It marked a significant leap from traditional modes such as NEFT and RTGS, providing greater convenience and accessibility to users.

Background and Introduction

The IMPS system was formally launched in November 2010 as a joint initiative of the NPCI, the Reserve Bank of India (RBI), and several participating banks. Its pilot phase began earlier in 2010 with four major banks — State Bank of India, Bank of India, Union Bank of India, and ICICI Bank. The service was designed to promote mobile banking and facilitate the government’s vision of Digital India and a cashless economy.
Unlike earlier systems such as NEFT (National Electronic Funds Transfer), which operated only during banking hours, IMPS offered instantaneous money transfer facilities at any time of the day. Its success laid the groundwork for subsequent innovations such as Unified Payments Interface (UPI) and BHIM.

Operational Mechanism

IMPS operates on a robust and secure infrastructure provided by NPCI. The service enables users to transfer funds using several identifiers, such as:

• Mobile Number and MMID (Mobile Money Identifier): The sender uses the recipient’s mobile number and a unique seven-digit MMID assigned by the bank.
• Account Number and IFSC (Indian Financial System Code): This method allows fund transfers similar to NEFT or RTGS.
• Aadhaar Number: Linked Aadhaar accounts can also facilitate fund transfers.

The process of an IMPS transaction generally follows these steps:

1. The sender logs into mobile banking, internet banking, or a bank’s application.
2. The sender enters recipient details and the amount to be transferred.
3. The system verifies details through NPCI’s central switch.
4. The beneficiary’s account is credited instantly, and both parties receive confirmation messages.

IMPS supports both person-to-person (P2P) and person-to-merchant (P2M) transactions, thereby catering to a wide spectrum of payment needs.

Features and Advantages

IMPS is characterised by several distinctive features that have contributed to its widespread adoption across India:

• Instant Transfer: Money is credited to the beneficiary’s account immediately, making it suitable for urgent payments.
• 24×7 Availability: The service operates continuously, including weekends and holidays.
• Wide Accessibility: Available through multiple platforms—mobile apps, ATMs, SMS, internet banking, and even USSD for basic phones.
• Security: Transactions are encrypted and authenticated through two-factor verification, ensuring data protection.
• Interoperability: Allows fund transfers across different banks and platforms under NPCI’s network.
• Nominal Charges: Transaction fees are relatively low compared to traditional remittance systems.

These features make IMPS particularly valuable for small-value payments, emergency transfers, and micro-transactions in both urban and rural areas.

Role of NPCI and Participating Banks

The National Payments Corporation of India acts as the central authority overseeing the functioning of IMPS. NPCI’s infrastructure ensures interoperability among participating banks, settlement of transactions, and compliance with regulatory frameworks. By 2024, more than 150 banks were connected to the IMPS network, covering both public and private sector institutions as well as cooperative and regional rural banks.
Participating banks provide IMPS through multiple delivery channels and are responsible for:

• Registering customers for mobile banking and issuing MMIDs.
• Enabling real-time transaction authorisation and fund settlement.
• Ensuring customer grievance redressal and transaction security.

Growth and Adoption in India

Since its inception, IMPS has grown exponentially in terms of both transaction volume and value. According to NPCI data, IMPS recorded billions of transactions annually, reflecting widespread public trust and the increasing penetration of digital payments. Its simplicity and reliability made it a preferred mode of transfer for both individual and business users.
The rapid growth of smartphone usage, internet connectivity, and the government’s emphasis on digital literacy further accelerated IMPS adoption. Additionally, banks integrated IMPS with their mobile applications, enhancing user convenience and experience.
IMPS also played a key role in financial inclusion, allowing users in semi-urban and rural regions to access formal banking and payment systems without visiting branches.

Comparison with Other Payment Systems

When compared with other interbank transfer mechanisms such as NEFT, RTGS, and UPI, IMPS offers a unique blend of immediacy and accessibility.

While UPI has surpassed IMPS in terms of retail adoption due to its QR-based and app-integrated interface, IMPS continues to serve as a reliable backbone for interbank fund transfers, especially for larger-value and institutional payments.

Security and Regulatory Framework

IMPS transactions are regulated by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007. Security measures include two-factor authentication, encrypted communication, and real-time monitoring for fraud detection.
Banks employ OTP (One-Time Password) verification, PIN authentication, and mobile number registration to prevent unauthorised transactions. NPCI continuously updates its cybersecurity protocols to ensure compliance with global standards such as ISO 27001.

Impact and Significance

The introduction of IMPS significantly transformed India’s financial ecosystem by:

• Enabling Real-Time Banking: Eliminating delays in fund transfers and enhancing customer convenience.
• Boosting Financial Inclusion: Providing accessible payment infrastructure for all strata of society.
• Supporting Government Policies: Contributing to initiatives like Digital India and Jan Dhan Yojana.
• Encouraging Fintech Innovation: Serving as a model for UPI and influencing other digital payment products.

IMPS has also contributed to the growth of the cashless economy, reduced dependency on physical branches, and improved transparency in financial transactions.