How Money Transfer Technologies Work: IMPS, RTGS, UPI & More

Introduction to Money Transfer Technologies

Money transfer technologies have transformed the way individuals and businesses send and receive funds. Whether handling instant transactions, processing high-value transfers, or enabling cross-border payments, various financial systems cater to different needs.

In this article, we explore different money transfer methods, their functionalities, and their key advantages.

Understanding the Core Mechanism of Digital Transactions

Every money transfer follows a structured process:

• Initiation: The sender enters payment details using a banking app, website, or POS terminal.
• Authentication: The transaction undergoes security verification through OTP, biometric authentication, or PIN.
• Processing: The transaction is processed through interbank systems or third-party networks.
• Settlement: The recipient receives the money instantly or within a scheduled timeframe.

IMPS (Immediate Payment Service)

What is IMPS?

IMPS is an instant electronic funds transfer system introduced by the National Payments Corporation of India (NPCI). Unlike traditional banking methods, IMPS ensures real-time crediting of funds, making it ideal for urgent transactions.

How IMPS Works:

1. The sender initiates a transfer using mobile banking, net banking, or a payment app.
2. The recipient’s details, such as mobile number, MMID (Mobile Money Identifier), or account and IFSC code, are provided.
3. The bank authenticates the transaction via OTP or MPIN.
4. Funds are transferred instantly, and both sender and recipient receive SMS confirmations.

Advantages of IMPS:

• Available 24/7, including weekends and holidays.
• Funds are transferred instantly.
• Works with both mobile numbers and account details.

RTGS (Real-Time Gross Settlement)

What is RTGS?

RTGS is a real-time funds transfer system designed for high-value transactions. Unlike NEFT, RTGS processes each transaction individually, making it highly secure and efficient.

How RTGS Works:

1. The sender provides the recipient’s bank account number and IFSC code.
2. The transaction is authenticated by the bank.
3. Funds are settled instantly during banking hours.

Advantages of RTGS:

• Used for large transactions (minimum ₹2 lakh in India).
• Ensures immediate fund settlement.
• Highly secure and regulated by the central bank.

NEFT (National Electronic Funds Transfer)

What is NEFT?

NEFT is an electronic payment system that processes transactions in hourly batches rather than in real-time. It is commonly used for smaller transactions.

How NEFT Works:

1. The sender provides the recipient’s bank details and IFSC code.
2. The transaction is added to a batch and processed at scheduled intervals.
3. Funds are usually credited within a few hours.

Advantages of NEFT:

• Suitable for small and medium transactions.
• No minimum transaction limit.
• Regulated by the Reserve Bank of India.

Blockchain-Based Money Transfers

Blockchain technology allows decentralized, peer-to-peer money transfers using cryptocurrencies like Bitcoin and Ethereum.

How Blockchain Transfers Work:

1. A sender initiates a payment using a crypto wallet.
2. The transaction is verified by network nodes and added to the blockchain.
3. Funds are transferred without banks or intermediaries.

Advantages of Blockchain Transfers:

• Lower transaction fees compared to traditional banking.
• Fast and borderless transactions.
• Highly secure due to cryptographic verification.

Conclusion

Money transfer technologies continue to evolve, providing faster, safer, and more convenient options. From instant domestic payments via UPI and IMPS to large-value RTGS transactions and global SWIFT transfers, each system serves a specific purpose.

As digital transactions expand, choosing the right payment method depends on factors like transaction speed, security, and value.