Spend Smart. Cash in on e-transfers

Vivian was in a tizzy. She had footed the bill for a lunch get-together with her office colleagues and the Centre’s demonetisation scheme came up right when it was time to split the bill. Satish too was in a fix. His college going son needed small change for his daily commute and to hang out with friends. Since his son did not have a bank account yet, using a debit or credit card was out of the question.

In such situations, options such as instant money transfer and digital wallets can come to your rescue.

There are a slew of electronic offerings by banks to facilitate smooth transfer of money. Most of us are aware of the electronic fund transfer through Real Time Gross Settlement (RTGS) or National Electronic Funds Transfer (NEFT). But, while RTGS is meant for high-value transactions, NEFT is not real time as it is processed and settled in batches.

An easier way to transfer money is through Immediate Payment Service (IMPS) that offers instant, 24x7, interbank electronic fund transfer through your mobile handset.

Under IMPS, to send money to another person, you need to enter the receiver’s account number and IFSC code or the mobile number and the Mobile Money Identifier (MMID) — a random, seven-digit number issued by banks. Under the latter, the beneficiary has to have his mobile number registered with his bank.

The charges for IMPS vary across banks. In most banks, charges are similar across NEFT and IMPS transactions, except for smaller ticket sizes. For transfers up to ₹10,000, NEFT carries lower charges than IMPS. For instance, ICICI Bank charges ₹2.5 plus service charge for transfer up to ₹10,000 under NEFT. Under IMPS, charges are ₹5 plus service charge for up to ₹1 lakh. There are also limits under IMPS that cap the transaction limit at ₹2 lakh (if done using IFSC code), lower than the ₹10 lakh available through NEFT. Nonetheless, IMPS scores both on convenience and speed.

IMPS is also now the back-end for most new applications offered by banks to make transfers even simpler — whether through mobile apps that help you transfer money within your social network or the latest Unified Payment Interface (UPI).

Under these options, you no longer need to key in the account number or MMID details of the recipient.

For instance, HDFC Bank’s Chillr is a mobile app which allows you to instantly transfer money to any contact in your phonebook. Here, you select the receiver from your list of Chillr contacts, enter the amount to be transferred, and finally your M-PIN. Pockets by ICICI Bank also offers a similar mobile interface through which you can send money to anyone, receive money from anyone, book movie tickets, recharge your mobile, gift physical/e-vouchers, and pay bills. With Pockets, you can transfer money to anyone’s mobile number, email, Google+ or Facebook account.

While these apps offered by various banks allows you to transfer money to other bank accounts, they are not entirely seamless. In case of Pockets, for instance, the recipient (not a pockets user) still has to redeem the electronic coupon that is generated, which can take a day in the case of non-ICICI bank account.

UPI, that went live recently and is also built on IMPS, is a simpler and more seamless way of transferring money between two different bank accounts by using a smartphone.

All you have to do is download one of the UPI apps from the Google Play store, verify your phone number, link your bank account and create your virtual payment address (VPA). The VPA (Vivian@icici) is unique to you and can be used to send or receive money.

The biggest advantage of UPI is that it is interoperable between banks — which means that you don’t have a different app for every bank account you use. What’s more, there are no additional charges for using the UPI interface, though the transaction limit is ₹1 lakh.

As far as convenience goes, UPI scores over all other options available through other mobile banking apps. Privacy is also maintained as you use only your VPA to transact and do not have to disclose your account details. The single interface for multiple banks is also a big advantage.

While UPI can be used to pay for products and services, currently you have access to limited merchants that each bank is tied up with. It will take a while for UPI to be widely accepted. Until then, you can explore other cashless options that have been in use for a longer time.

The most obvious choice for most of us is to use your debit or credit card. Otherwise, digital wallets such as Paytm, Oxigen, etc come in handy. These instruments are regulated and governed by the RBI and are pre-loaded with money.

You can use this to buy goods and services instead of your credit or debit cards. All that you have to do is load small sums of money into the digital wallet from your debit or credit card and you are good to go.

Here too, each wallet provider is tied up with a set of merchants. The maximum amount you can load on these wallets has now been increased to ₹20,000 (after the RBI’s leeway post demonetisation) from ₹10,000 earlier. The limit can go up to ₹1 lakh if full KYC is done.

There are also some wallets such as Oxigen that allow cash loading at specific retail points. Currently in India, the regulator does not allow wallet-to-wallet transfer, which means that once you load money in, say, Oxigen, you cannot transfer the money to Paytm.

Furthermore, you may not like to let your money idle away in multiple wallets since it doesn’t earn interest. Few players such as Oxigen provide the facility of money transfer to your bank account using IMPS.

But do take note of the charges that vary across players.

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