Ease of use and free-of-charge transactions are triggering a quantum jump in Unified Payments Interface (UPI)-based digital payments even as growth of digital payments based on the older Immediate Payment Service (IMPS) facility seems to be moving towards the levelling off phase.

 

Value and volume

UPI transactions in value terms in the first half (H1) of FY21 rose 71.5 per cent year-on-year (y-o-y) to ₹15,49,240 crore vis-a-vis 12 per cent growth in IMPS transactions to ₹12,07,067 crore.

In volume terms, too, there has been a spike in UPI transactions vis-a-vis IMPS. The volume of UPI transactions in H1 FY20 jumped 71 per cent y-o-y to 848.73 crore vis-a-vis 9 per cent y-o-y growth in IMPS transactions to 123.59 crore.

“UPI is easier to use. One can send or receive money using either the mobile number or the virtual payment address. The transaction can be initiated by both the sender as well as the receiver of funds.

“In the case of IMPS, the sender (remitter of funds) will require the beneficiary’s account number as well as the IFSC (Indian Financial System Code) of his branch. Only the sender can initiate the transaction,” said the CIO of a Bank.

The UPI mode of payment is free of charge for customers whereas banks charge for use of IMPS mode of payment.

For example, HDFC Bank currently charges ₹3.50 + Goods and Service Tax (GST) for a transaction amount of up to ₹1,000; ₹5+ GST for ₹1,001 to ₹1 lakh; and ₹15 + GST for above ₹1 lakh.

“The UPI channel accounts for the highest number of digital transactions in almost every bank.

“In fact most banks are troubled because there are too many low value transactions, which are weighing down the core banking solution as well as the overall infrastructure with no gain to the bank,” said the senior banker quoted above.

The upper limit for transactions in the case of UPI is ₹1 lakh or 10 transactions (calculated on a 24 hours basis). The upper limit in the case of IMPS is ₹2 lakh per transaction.

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