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Payments imps
- 1. 1 Payment Systems & IMPS Chintan Patel B.E(Comp) ; MBA(Finance) 26-Apr-2013
- 2. 2 Agenda Payment Systems Existing Payment Systems – ECS, NEFT & RTGS Mobile Payments – IMPS Modes of Transfer & Various Use cases Process Flow Advantages & Disadvantages Comparison with other payments Future Payments Emerging Trends
- 3. 3 Payment Systems Definition: Financial system supporting transfer of funds from payers to payee/s. Role: Payment systems to provide safe, efficient, affordable, easily accessible and robust payment services Payment systems help in the smooth flow of money in the economy thus increasing the liquidity in the hands of the customer enhancing his purchasing capacity Payment systems would also help minimize cases of fraud, use of counterfeit notes and black money
- 4. 4 Payment Systems across time Yesterday Today Barter System Early civilization Cowries , coins, precious metals Middle ages Hundi 12th Century late 18th CenturyCurrency 19th CenturyPromissory notes, bills of exchange, cheques Travellers’ Cheques 20th Century 1980s ATMs, MICR based cheque processing centres, Cards (credit and debit) 1990s Internet Banking, ECS, EFT 2004 2005 2007 2008 RTGS NEFT Mobile Banking CTS 2010 IMPS
- 5. 5 Payment Systems – Stakeholders RBI NPCI CCILBanks Retail Customers Corporate Customers SME Customers
- 6. 6 Classification Indian Payments Retail Paper Based Cheque - MICR Demand Draft Electronic Based ECS NEFT Cheque Truncation system Mobile Based IMPS Large Value Systems Paper Based Electronic Based RTGS
- 7. 7 Global Payments Use of payment instruments by non-banks: total number of transactions, 2010 (Millions, total for the year) Source: Data is from the Bank for International Settlements’ Statistics
- 8. 8 Payments in India Paper – Cash and Cheque Electronic – ECS, Cards, NEFT, RTGS and Mobile Source : RBI website
- 9. 9 Electronic Clearing Service (ECS) It was introduced by RBI Provided an alternative method of effecting bulk transaction Avoided need for issuing and handling paper instrument User has to submit the mandate to the bank. (E.g.: MICR -Cancelled Cheque) No Transaction limit There are two types of ECS: ECS – Debit - There is multiple debit from vast section of people and corresponding single credit entry. E.g.: Bill payment ECS - Credit - Electronic fund transfer from one account to many transactions transfers. E.g.: Salary Payment
- 10. 10 Real Time Gross Settlement (RTGS) Introduced by RBI in 2004 RTGS systems are managed by RBI.Transfer anywhere within India. Funds for > Rs 2 lakh to be transferred through RTGS. Lower funds cannot be transferred . Upper Transaction limit set by individual bank. Payment instruction handled individually. Payment is final and irrevocable and the receiver can utilize the funds immediately RTGS Timings: Weekdays : 9:15 AM to 4:15 PM Saturday : 9:15 AM to 1:15 PM ; No settlement on Sundays and Holidays Service Charge applicable to customer Steps for Transaction : Register Payee & Transfer Funds
- 11. 11 National Electronic Funds Transfer System (NEFT) It was launched by RBI in 2005 It permits to transfer funds of lower value. Neither lower limit nor upper limit Transfer anywhere within India Operate on a deferred net settlement (DNS) basis which settles transactions in batches. NEFT Timings: Weekdays: 12 times every hour from 8:00 AM to 7:00 PM Saturday : 6 times every hour from 8:00 AM to 1:00 PM No transfer on Sundays and Holidays Service Charge is applicable to the Customer Steps for Transaction : Register Payee & Transfer Funds
- 12. 12 National Payment Corp. of India (NPCI) Initiated by Reserve Bank of India (RBI) Private limited company incorporated in December 2008 Ten core promoter banks ( State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank and HSBC) Board Chairman - Shri N. R. Narayana Murthy RBI representatives are Board Members
- 13. 13 InterBank Mobile Payment Service (IMPS) Initiated by NPCI along with 4 Member banks – SBI, Bank of India, Union Bank of India and ICICI Bank Launched on 22nd November 2010 Service available to Public To participate in IMPS, Banks should have approval from RBI Available with 54 Banks
- 14. 14 Objective of IMPS Make a Mobile as Channel Available – 24 X 7 X 365 No more sharing of bank account details Instant Payment – Simple, convenient Time & cost saving Safe & Secure Immediate Confirmation Use existing payments infrastructure (existing ATM networks)
- 15. 15 Advantages of Mobile Channel Mobile phone is a universal device 900+ million connections and growing most Indian families have access to one It is a two way communication device Unlike cards Multiple level of security possible Multi-mode communications SMS, Internet, USSD and Voice Even the semi-literate and illiterate people find it easy to use Enables transactions in-person and remotely
- 16. 16 Modes of Transfer Funds Transfer using Mobile Using Mobile Application Using SMS Using National Unified USSD Platform (NUUP) Funds Transfer using Internet To Account registered to IMPS To Account not registered to IMPS (Using Indian Financial System Code[IFSC]) Funds Transfer through ATM Merchant Payments through Internet – Using OTP
- 17. 17 Steps for Transaction Registration of Remitter – Generate MMID MMID (Mobile Money Identifier) is 7-digit number, to be issued by the Bank. Unique number for every associated account Registration of Beneficiary – Generate MMID Funds Transfer Login to Mobile Banking Application or Send SMS Enter Beneficiary MMID, Beneficiary Mobile Number & Amount Funds Transferred Immediately Remitter & Beneficiary receives confirmation
- 18. 18 IMPS – Process Flow
- 19. 19 Demonstrate IMPS Account Holder A wants to transfer funds Citi Bank Account ICICI Bank Account IMPS
- 20. 20 Transaction using Mobile Application Generate MMID
- 21. 21 Transaction using Mobile Application Generate MMID
- 22. 22 Transaction using Mobile Application
- 23. 23 Transaction using Mobile Application
- 25. 25 Transaction using National Unified USSD Platform (NUUP) Unstructured Supplementary Services Data (USSD)
- 28. 28 Transaction Limit & Service charge Transaction Limit RBI Mandate - With end to end encryption: Banks are free to set their own limit. For ICICI Bank - Limit of 5 lakhs For CITI Bank – Limit of 49,000 RBI Mandate - Without end to end encryption: Transaction up to Rs 5,000. For CITI Bank & ICICI Bank – Txn Limit of 1000 Service Charges RBI Mandate - The charges for remittance through IMPS are decided by the individual banks No Charges in Citibank Charges in ICICI IMPS Amounts upto Rs 10,000 Rs 2.50 + Service Tax Amounts above Rs 10,000 and upto Rs 1 lakh Rs 5 + Service Tax Amounts above Rs 1 lakh and upto Rs 2 lakh Rs 15 + Service Tax Amounts above Rs 2 lakh and upto Rs 5 lakh Rs 25 + Service Tax
- 29. 29 Use Cases • Currently - Cash • IMPS thru Mobile Pay Auto-fare • Currently - Cash • IMPS thru Mobile Give money to family member • Currently – Debit Cards, Credit Card, Net Banking • IMPS thru Internet Buy railway tickets online • Currently – Debit Cards, Credit Card, Net Banking • IMPS thru Internet Online Shopping • Currently – Debit Cards, Credit Cards, Cash • IMPS thru Mobile Buy goods from stores
- 30. 30 Use-cases •Currently - NEFT, RTGS, Cheque, Demand-Drafts •IMPS thru Mobile or InternetTransfer Funds •Currently - Cash •IMPS thru MobileBuy vegetables •Currently – Debit Cards, Credit Card, Net Banking •IMPS thru InternetPay Mobile Bills online •Currently – Debit Cards, Credit Cards, Cash, Cheque •IMPS thru MobilePay Mobile Bills at store •Currently – Cash •IMPS thru MobilePizza Delivery
- 31. 31 Pros and Cons Advantages Disadvantages
- 32. 32 Comparison with other payments IMPS NEFT RTGS Time to Process Instantaneous Operates every one hour Instantaneous Availability 24 X 7 X 365 Available in working hours Available in working hours Restriction on Amount Maximum 5 Lakh Maximum 5 Lakh > 2 Lakh Maximum 5 Lakh Service Charge Tiered Charges Tiered Charges Tiered Charges Geographic spread Supported by 54 Banks 78,000 enabled bank branches 78,000 enabled bank branches Channels Mobile – SMS, Mobile Application, USSD Internet Internet, Branch Internet, Branch Reliability Low due to Mobile Service High High
- 33. 33 Comparision with other payments Source : RBI website
- 34. 34 Law of Diffusion of Innovation
- 35. 35 Future Payments Mobile Wallets Mobile Voice Banking Mobile Voice Banking System which authenticates voice input with the help of caller id and biometric voice authorisation and validates registered users
- 36. 36 Trends for Future Payments • Do the payment products are convenient to use? • Is the pricing of products affordable and transparent? Are we providing low- cost, technology based payment products ?Cost • Do the payment products are convenient to use?Convenience • Do the systems and processes create confidence in people to use electronic payment system?Confidence • Are all stake-holders working towards standard product and processes?Convergence • Are we protecting Consumer’s Information? Have we created accessible and timely resolution of consumer grievances redressal mechanism?Consumer Protection • Are we creating awareness in consumers for creating a viable payment system for FI?Communication
- 37. 37 Innovate to Win “An innovation is more than just a great idea…. innovation requires attention to other people: what they value and what they will adopt. It must contribute to transformation in a society and be adopted by users.”
Notes de l'éditeur
- CTS: Cheque Truncation System
- National clearing Cell / Clearing House :Is the functional unit of the local Bankers' Clearing House or such other agency to be created by RBI which shall process the instructions for debit payment received in data file from the Sponsor Bank and will generate relevant ECS Debit Clearing settlement reports for debit / credit of the current accounts maintained at RBI / Settlement Bank. The institutional arrangements made by RBI shall be final. National Clearing Cell (NCC) or the Clearing House (CH) is responsiblefor processing transaction information to sponsor bank, destinationbank as well as the RBI’s clearing agency. Banks that are willing to availthis facility should apply to NCC /CH for approval.Clearing and Settlement of debt instruments and forextransactions, Reserve Bank of India initiated the move to set up The Clearing Corporation of India Ltd. (CCIL). The country’s largest bank, StateBank of India, took the lead in setting up of the CCIL. The other core promoters of CCIL are LIC, IDBI, ICICI Bank, HDFC Bank, and Bank ofBaroda. Subsequently, CCIL invited all the important commercial banksand primary dealers to take up shareholding so that CCIL truly becomes aventure of the major players in the Indian financial system. CCIL was incorporated on the April 30, 2001National Clearing Cell (NCC) / Clearing House (CH) - Is a functional unit of the local Bankers’ Clearing House or such other agency to be created by RBI for processing the payment instructions received on electronic media from the Sponsor Banks and generate relevant clearing reports for settlement of accounts of banks at RBI / Clearing House. The institutional arrangements made by RBI shall be final.
- National Payments Corporation of India (NPCI) was incorporated in December 2008 and the Certificate of Commencement of Business was issued in April 2009. It has been incorporated as a Section 25 company under Companies Act and is aimed to operate for the benefit of all the member banks and their customers. The authorized capital has been pegged at Rs 300 crore and paid up capital is Rs 100 crore so that the company can create infrastructure of large dimension and operate on high volume resulting payment services at fraction of the present cost structure.Reserve Bank of India, after setting up of the Board for Payment and Settlement Systems in 2005 released a vision document incorporating a proposal to set up an umbrella institution for all the Retail Payment Systems in the country. The core objective was to consolidate and integrate the multiple systems with varying service levels into nation-wide uniform and standard business process for all retail payment systems. This led to the formation of National Payments Corporation of India, (NPCI).
- Currently majority of interbank mobile fund transfer transactions are channelised through NEFT mechanism. Under NEFT, the transactions are processed and settled in batches, hence are not real time. Also, the transactions can be done only during the working hours of the RTGS system.In the above context, NPCI has carried out a pilot on mobile payment system initially with 4 member banks viz State Bank of India, Bank of India, Union Bank of India and ICICI Bank in August 2010. Yes Bank, Axis Bank and HDFC Bank have joined this pilot in month of September, October and November 2010 respectively. Immediate Payment Service (IMPS) public launch happened on 22nd November 2010 by Smt. ShyamalaGopinath, DG RBI at Mumbai and this service is now available to the Indian public.IMPS offers an instant, 24X7, interbank electronic fund transfer service through mobile phones. IMPS facilitate customers to use mobile instruments as a channel for accessing their bank accounts and put high interbank fund transfers in a secured manner with immediate confirmation features.This facility is provided by NPCI through its existing NFS switch.The eligible criteria for the Banks who can participate in IMPS is that the Bank should have approval from RBI for Mobile Banking Service.
- IMPS offers an instant, 24X7, interbank electronic fund transfer service through mobile phones. IMPS facilitate customers to use mobile instruments as a channel for accessing their bank accounts and put high interbank fund transfers in a secured manner with immediate confirmation features.This facility is provided by NPCI through its existing NFS switch.To enable bank customers to use mobile instruments as a channel for accessing their banks accounts and remit fundsMaking payment simpler just with the mobile number of the beneficiary To sub-serve the goal of Reserve Bank of India (RBI) in electronification of retail paymentsTo facilitate mobile payment systems already introduced in India with the Reserve Bank of India Mobile Payment Guidelines 2008 to be inter-operable across banks and mobile operators in a safe and secured mannerTo build the foundation for a full range of mobile based Banking services.Key features Instant interbank fund transfers 24 x 7 x 365 availability No more sharing of bank account details Credit and debit confirmations to sender and receiver Simple & easy to use Time & cost saving Safe & secure Easily adaptable for merchant payments and financial inclusions
- MMID is a 7 digit number, to be issued by the bank to the customer upon registration Multiple accounts per mobile number Eliminate human errors Transaction routing Registration:Register mobile number with respective bankGenerate MMID. MMID (Mobile Money Identifier) is 7-digit number, to be issued by the Bank to the customer upon registrationGet M-PIN. M-PIN is Mobile Banking PIN – secret password – to be used by customer during transaction for authentication and securityDownload mobile banking application or use SMS / USSD facility as provided by the Bank to make paymentTo find details on how to do the above for your respective bank, Click Here
- Unstructured Supplementary Services Data (USSD)Unstructured Supplementary Services Data (USSD) allows for the transmission of information via a GSM network. Contrasting with SMS, it offers real time connection during a session. A USSD message can be upto 182 alphanumeric characters in length. Unstructured Supplementary Service Data allows interactive services between a MS and applications hosted by the Mobile Operator. These messages are composed of digits and the #, * keys, and allow users to easily and quickly get information/access services from the Operator.USSD messages are simple to form and easy to send. User can directly enter the ussd string and press call to send the message. A typical USSD message starts with a * followed by digits which indicate an action to be performed or are parameters. Each group of numbers is separated by a *, and the message is terminated with a #. The USSD gateway in turn can interact with external applications based on the USSD command. This allows access to number of value added services via USSD.USSD is a session oriented service, and can support a sequence of exchange of information. Phase 2 USSD also allows messages to be pushed onto a MS. It is several times faster than MO SMS messages since there is no store and forward of messages. The USSD gateway supports an open HTTP interface.The USSD gateway will have an interface with the MSC over SS7. It uses MAP to receive and send USSD data from the HLR.Generally the USSD functionality is implemented in the following modes:Pull Mode, will handle Mobile Initiated USSD Requests.Push Mode will handle network Initiated USSD Requests.Unstructured Supplementary Service Data (USSD) is a protocol used by GSM cellular telephones to communicate with the service provider's computers. USSD can be used for WAP browsing, prepaid callback service, mobile-money services, location-based content services, menu-based information services, and as part of configuring the phone on the network.[1]USSD messages are up to 182 alphanumeric characters in length. Unlike Short Message Service (SMS) messages, USSD messages create a real-time connection during a USSD session. The connection remains open, allowing a two-way exchange of a sequence of data. This makes USSD more responsive than services that use SMS.[1] Characteristics of USSD:A USSD message can be upto 182 alphanumeric characters in lengthUnlike SMS, USSD is a session oriented serviceSimple and easy to send. No need to go into any menus and options. Just directly entered on the default mobile screen.USSD works on all GSM handsets of Phase II or later.There will not be any latency in request and responce as we experience in SMS based servicesThe functionality will be the same even while roaming as the USSD messages always routed back to Home HLR.USSD is supported by WAP, SIM Application Toolkit and CAMEL enabling scope for many applciations.Works in two modes: pull mode and push mode. Applications:USSD can be used as a WAP bearer.Used for menu based content services like news, weather, sports etcUsed for prepaid callback service enabling prepaid roaming a better serviceUsed in location based content servicesUsed in SIM Application tool kit based application
- Bank nameHow to generate OTPUnion Bank of India1) Send SMS <OTP> <MPIN> to 92231739212) In Mobile Banking Application,Main Menu-->Immediate Payments Service (IMPS)-->Generate OTPThe transaction limit for OTP generated through mobile banking application is Rs 50,000/- and through SMS is Rs 5,000/- per transaction
- This is a Mobile Voice Banking System which authenticates voice input with the help of caller id and biometric voice authorisation and validates registered usersFunctionalities like balance enquiry, funds transfer and mini-statement could be made availableRuPay, a new card payment scheme launched by the National Payments Corporation of India (NPCI), has been conceived to fulfill RBI’s vision to offer a domestic, open-loop, multilateral system which will allow all Indian banks and financial institutions in India to participate in electronic payments.“RuPay”, the word itself has a sense of nationality in it. “RuPay” is the coinage of two terms Rupee and Payment. The RuPay Visual Identity is a modern and dynamic unit. The orange and green arrows indicate a nation on the move and a service that matches its pace. The color blue stands for the feeling of tranquility which is the people must get while owning a card of the brand ‘RuPay’. The bold and unique typeface grants solidity to the whole unit and symbolizes a stable entity.RuPay[1] is the Indian domestic card payment network being set up by National Payments Corporation of India (NPCI) at the behest of banks in India.[2] This project had been conceived by Indian Banks Association and had the approval of Reserve Bank of India. The objectives to be fulfilled are :Reduce overall transaction cost for the banks in India by introducing competition to international card schemes.Develop products appropriate for the country particularly for financial inclusion.Provide card payment service option to many banks who are currently not eligible for card issuance under the eligibility criteria of international card schemes.Build environment whereby payment information of the country remains within the countryShift Personal Consumption Expenditure (PCE) from cash to electronic payments in a growing economy with a population of 1.2 billionNPCI will soon provide a full range of card payment services including the RuPay ATM, RuPayMicroATM, Debit, Prepaid and Credit Cards which will be accepted in India and abroad, across various channels like POS, internet, IVR and mobile etc. Initial focus of NPCI would be to approach those banks who have not been issuing any payment card at all. Regional Rural Banks and urban co-operative banks are ideal. In due course, it would approach other banks and enter the mature segments in competition with international card schemes who have already got a good presence.