IMPS: A Trailblazer in India's Digital Payment Revolution – Past, Present, and Future

As Immediate Payment Service (IMPS) celebrated its 14th anniversary on 22nd November 2024, it stands as a cornerstone of India’s digital payment ecosystem. A product of the National Payments Corporation of India (NPCI), IMPS has not only redefined interbank fund transfers but also played a critical role in shaping the country’s journey toward becoming a cashless economy. With continuous innovations, enhanced limits, and adoption by fintech players, IMPS is now poised to play an even greater role in India’s digital future.

This article dives deep into IMPS’s evolution, its role in the digital ecosystem, and its potential to further transform India’s financial landscape by facilitating credit, enabling fintech innovations, and supporting MSMEs and corporates.

The Genesis of IMPS: Solving a Critical Problem

Before IMPS was introduced in November 2010, real-time interbank fund transfers were virtually non-existent in India. Users were limited to services like NEFT (National Electronic Funds Transfer) and RTGS (Real-Time Gross Settlement), which operated only during banking hours and lacked instant transaction capabilities. For a country with diverse demographics and rapid urbanization, this created a significant gap in enabling seamless, 24x7 payments.

With these challenges in mind, NPCI launched IMPS, a revolutionary real-time payment service built on the National Financial Switch (NFS), using the ISO 8583 messaging standard. IMPS offered an instant, 24x7, interbank fund transfer service that was accessible across multiple channels: mobile banking, internet banking, ATMs, and SMS.

IMPS wasn’t just a technology innovation—it was a paradigm shift. For the first time, users could experience real-time, round-the-clock fund transfers with unparalleled safety, reliability, and cost-effectiveness. This placed India among the elite group of nations pioneering efforts to transition toward a less-cash economy.

IMPS by the Numbers: Current Trends

IMPS has come a long way since its inception. Here are some key statistics showcasing its growth and relevance:

1. Adoption and Reach: As of 2024, IMPS supports 912 live members, including banks and Prepaid Payment Instruments (PPIs).
2. Transaction Volume and Value: IMPS processed 4.8 billion transactions in FY 2023-24, with a total transaction value exceeding ?48 trillion. This represents a consistent 20% annual growth in transaction volumes over the past five years.
3. Use Cases: IMPS is increasingly used for high-value B2B (Business-to-Business) and B2C (Business-to-Consumer) transactions, thanks to its increased transaction limit of ?5 lakh per transfer and enhanced messaging standard (ISO 20022).

The service continues to serve a diverse range of users—from retail customers transferring small amounts to corporates executing high-value transactions. Its interoperability and reliability make it an integral part of India’s payment ecosystem.

The Role of IMPS in India’s Digital Ecosystem

IMPS is more than just a payment system; it is the backbone of India’s digital payment infrastructure, empowering various stakeholders in the financial ecosystem:

1. Enabling Financial Inclusion

IMPS has made digital banking accessible even in rural and underserved regions by supporting mobile and SMS-based transactions. This aligns with India’s broader financial inclusion goals, as highlighted in the Pradhan Mantri Jan Dhan Yojana (PMJDY), which has brought over 530 million bank accounts into the formal financial system.

2. Boosting MSMEs

Micro, Small, and Medium Enterprises (MSMEs), which contribute over 30% to India’s GDP, rely heavily on instant, cost-effective payment solutions. IMPS has become a trusted tool for MSMEs to manage their cash flows, process supplier payments, and ensure timely wage disbursements.

3. Supporting Fintech Innovation

The rise of fintech platforms in India owes much to the versatility of IMPS. Fintechs leverage IMPS for push-based payments, innovative credit disbursements, and real-time settlement solutions. For example:

• Loan Repayments: Several NBFCs and fintechs now offer real-time loan disbursals and repayments through IMPS.
• Bill Payments and Utility Services: IMPS is frequently used in platforms integrating real-time bill payments and recharges.

4. Strengthening Corporate Transactions

The recent migration of IMPS to the ISO 20022 messaging standard has made it a preferred platform for corporates. The enriched data capabilities enable streamlined reconciliation, real-time reporting, and enhanced interoperability for cross-border use cases.

The Future of IMPS: Credit Disbursement and Beyond

IMPS is now positioned to drive the next phase of growth in the digital ecosystem by expanding its role in credit disbursement and embedded finance. Here's how:

1. Instant Credit Through IMPS

• IMPS’s real-time capabilities make it an ideal platform for disbursing small-ticket loans, microcredit, and emergency credit to individuals and MSMEs. This could potentially complement ongoing initiatives like OCEN (Open Credit Enablement Network) and the Unified Lending Interface (ULI).
• With fintechs and NBFCs adopting IMPS for push-based payments, there’s significant potential for introducing seamless credit solutions integrated with IMPS.

2. Enabling Digital Ecosystem Growth

• IMPS will continue to serve as a reliable fallback mechanism for digital payments, especially in cases of UPI failures during peak load periods.
• It can support emerging technologies like RegTech for automated compliance and fraud detection in real-time transactions.

Expert Opinions on the Future of IMPS

As India’s digital payments landscape evolves, experts believe IMPS will remain relevant as both a standalone system and a supporting infrastructure for newer innovations like UPI. Here’s what industry leaders have to say:

• Dilip Asbe, CEO, NPCI: "IMPS is a pioneering service that has consistently delivered value to the Indian payment ecosystem. With the increased transaction limit and adoption of ISO 20022, IMPS is well-equipped to support corporate use cases and new-age fintech innovations."
• In my opinion "While UPI is often viewed as the flagship product for retail payments, IMPS plays a critical role in enabling high-value, reliable transactions, particularly for businesses and MSMEs. Its capacity to support credit disbursement could be a game-changer in financial inclusion."

IMPS – The Catalyst for Digital Transformation

IMPS has cemented its place as a trailblazer in India’s digital journey. From empowering individuals with real-time, secure fund transfers to enabling businesses with high-value transactions, IMPS has truly revolutionized the payment landscape.

Looking ahead, IMPS’s role in credit disbursement, fintech innovation, and corporate transactions will further strengthen its impact on India’s financial ecosystem. As a pioneer of instant payments, IMPS will continue to lead from the front, setting the stage for a more inclusive and digitally empowered India.

As we celebrate the 14th anniversary of IMPS, let us take a moment to reflect on its legacy and look forward to its bright future.