As the world evolved with time, technology has become a huge part of all of our lives. It governs every aspect of our lives, from education to workplace to healthcare to finance. Technology has greatly impacted our day-to-day lives and continues to do so. With every new development and invention, a ripple effect is created, and it ends up affecting certain, if not all, areas of human life. Similarly, the invention of the cell phone, coupled with the development of the internet, has definitely changed the very trajectory of the financial world. It has taken astonishing strides within the past decades and continues to grow in the same manner. From cashless transactions to digital transactions and a gradual shift to a cashless system of financial operation- the financial world has truly seen a remarkable change. This is where systems like IMPS and UPI have come in and changed the scene.

Let us now compare the two types of payment solutions—IMPS and UPI—to find similarities and/or differences.

IMPS: a brief overview –

IMPS, which is short for Immediate Payment System, is a payment system that was developed by the National Payments Corporation of India(NPC). It was launched in the year 2010 and it enabled users to transfer funds in real time between bank accounts irrespective of the day, date or time. It is a 24x7 fund transfer service that can help users instantly transfer funds. It is a mobile-based platform that allows money transfers with the help of the internet to make fund transfers possible through mobile numbers, account details, or IFSC codes. It is a hugely popular tool that is used for personal peer-to-peer transactions as well as merchant payments for businesses, payment of bills, payment for goods and services, etc. The primary function of IMPS is to facilitate money transfers at all times of the day, unlike a regular bank transaction, which can only happen during business hours. It is a really efficient and easy solution for instant financial requirements. The main idea behind the creation of IMPS was to eliminate the need for banking customers to physically visit the branch for the smallest of transactions.

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Now, let us understand what UPI is-

UPI is the shirt for United Payments Interface, launched by the National Payments Corporation of India in the year 2016. UPI facilitates fund transfers through a Virtual Payment Address, eliminating the need for transfers through account details, phone numbers, and IFSC codes. It was built on the framework of the IMPS, but it is specially designed to be enabled through the VPA. It also allows peer-to-peer transactions, payment for goods and services, shopping, merchant payment, and payment of bills and utilities. It is a widely popular system of digital payment and has a huge userbase in India. It has definitely changed the entire ecosystem of the Indian financial system with its efficient and hassle-free functioning.

UPI was created as a model to allow an interoperable banking system that would facilitate all leading banks in India to be connected to a payment system which would enable real-time money transfers and other banking services. It is based on the IMPS system but offers additional functions like checking balances, etc. and also the medium has been diversified in that it can be done through VPAs like mobile numbers, scanners, QR codes, etc., making it more accessible.

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Time to understand the Key similarities between IMPS and UPI-

Both IMPS and UPI share some common features because the essential idea for developing both of these financial systems was to help people get access to digital transactions from the convenience of a cell phone. Let us take a look at these similarities-

Immediate transfer of funds- At the heart of their functioning is the idea that they both facilitate instant money transfers between two bank accounts in real-time. IMPS and UPI ensure that the fund transfer is successful within minutes or even seconds of initiating and completing the process, making them ideal for urgent financial needs and personal and business transactions.

User-friendly- Both IMPS and UPI have very user-friendly systems that require simple steps for transferring funds. Since both were designed to make banking options accessible to all Indians, their functioning is kept simple and minimal so that anyone can operate them easily.

Accessibility- IMPS and UPI are very accessible and made to be consumer-friendly. They can be used via cell phones and do not have a restricted time period or day restriction, meaning they are available 24/7 for everyone.

Supported by NPCI- Both IMPS and UPI are backed and supported by a government body called NPCI, which means that they are both legal and come under the aegis of the Government of India. They are both tools that pave the way for digitising India's financial landscape and making it technologically sound and powerful.

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Now let us look at the difference between imps and upi-

Although the functional concept is the same for both UPI and IMPS- which essentially allows users to transfer money from one bank account to another, many differences set them apart. Let us explore these differences and understand them-

The medium through which payment is made- While UPI allows users to transfer money through a special Virtual Payment Address called a VPA, IMPS requires both account details and the IFSC code of the bank account to which the money is being transferred. The VPA is a unique identifying code, which could be a number, email, etc – this one simple code allows users to easily transfer money to the account, while IMPS is more traditional in that it requires long-form details of the bank for the transfer to go through.

Platform- UPI can be accessed through various UPI-enabled applications and platforms like Google Pay, Paytm, Phonepe, etc., while IMPS can be used through mobile banking services, internet banking, ATMs, or SMS. It can be done through a cell phone, but it does not require a specific platform or app especially meant for IMPS. UPI is accessible through various third-party applications.

Nature of usage- UPI has become the most popular payment tool used by lakhs of people across India daily. It is used for day-to-day activities like shopping for groceries, paying fares, paying bills, online shopping, transferring funds, and all kinds of services. It is universal and is used for personal as well as business transactions very frequently. On the other hand, IMPS is mostly used for transferring funds from one bank account to another. It is generally only used for specific fund transfers, not everyday payments.

Safety and security while using- When using UPI, the user is always prompted to perform a two-factor authentication step for security purposes. They need to unlock their UPI app with a PIN and authenticate the payment using a transaction PIN. UPI also uses end-to-end encryption to ensure maximum and optimum security. IMPS also uses encryption and security protocols but does not have the same level of security as UPI.

Limit on daily transaction- For a UPI-based transaction, the daily limit is typically set at 1,00,000 per day, although it can vary depending on the bank. This limit is perfect for small-value payments. IMPS, on the other hand, allows a transaction of up to 2,00,000 per day, in contrast to UPI.

Additional costs: A UPI transaction is generally free for both the transferer and the receiver. UPI does not charge any fee for small-value transactions. Depending on your bank, a nominal fee is charged for IMPS transactions. The charge may not be much, but in comparison, that makes IMPS slightly more expensive than UPI.

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IMPS vs UPI- which is better?

Both IMPS and UPI have their own special usages. They help users instantly transfer money and are an everyday digital payment tool backed by NPCI and supported by the government of India. An IMPS transaction is perfect for emergencies and transactions that require a fund transaction of up to two lakhs. It is a good option for when you have also exhausted your transaction limit on UPI. A UPI transaction is perfect for everyday small-value transactions. It can be used for shopping, paying bills, transferring small amounts of money, etc. It is really useful for merchant transactions, recharges and personal transfers of smaller amounts. Depending on the situation- both IMPS and UPI have their own advantages and can be used accordingly. They are integral to the modern-day financial ecosystem and crucial tools supporting a cashless and digitally savvy India. In terms of safety and security, they are also very safe and can be used by anyone with access to a cell phone, smart device and a stable internet connection.

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Conclusion

IMPS and UPI have revolutionised India's entire financial and banking landscape. They have been instrumental in helping people find immediate financial solutions when it comes to the transfer of funds. They eliminate the need to line up in banks or queue for long hours for a simple transaction. They allow users to easily transfer funds from the convenience of their homes with the help of a mobile phone and a stable internet connection. IMPS and UPI have both become vital money transfer tools in India and continue to provide real-time transaction benefits to Indians across the nation. They can be used to optimise your digital payments as per your requirements. Financial literacy is important, so it is always important to make informed choices as consumers and know the workings, differences and similarities between the two. When you have the required knowledge and information, you can use both tools efficiently and as per your needs. By understanding their features and limitations- you can make informed choices to best suit your needs as a user. It is necessary to understand your requirements and know whether IMPS would be the better option for a certain situation or whether you need to make use of UPI. With both available at your service- users can conveniently use the one that makes the perfect options.

FAQs

Are IMPS and UPI the same?

No, IMPS and UPI are different money transfer tools that help users transfer money instantly from one bank account to another. They both have different working systems.

Is there a specific app for IMPS transfer?

No, IMPS transfers do not require a specific application; they can be made via mobile banking, internet banking, ATM, or SMS.

How can we make UPI transfers?

There are many third-party UPI-enabled applications and platforms that will allow you to transfer money through UPI and VPA, such as Googlepay, phone, Paytm, etc.

Is using UPI safe?

Yes, UPI is a safe option for money transfer because it uses encrypted data and a two-step authentication factor system to ensure that your data remains safe and protected.

Can I use IMPS at all times of the day?

Yes, IMPS transfers can be done at all times of the day. Its usage is not restricted to business hours and can be done anytime.

What details are required for IMPS transfer?

The details required for IMPS transfers are- bank account number, account details and IFSC code.

Can money be sent to a bank account in a different bank via UPI?

Yes, the idea behind UPI is that it allows users to transfer money to any bank account, provided it has a VPA—a virtual payment address that is used to receive and transfer money via UPI.

Can UPI be used for checking account balances?

Yes, any UPI-enabled platform or application also allows users to check their bank balance.