UPI vs. NEFT vs. IMPS: Which is Preferred?

India has many ways to transfer money supported by the Reserve Bank of India (RBI) and National Payment Corporation of India (NPCI) using banking platforms, BHIM app, payment banks as well as payment wallets. These methods are Unified Payment Interface (UPI), Real Time Gross Settlement (RTGS), National Electronic Funds Transfer (NEFT), Immediate Payment Service (IMPS), Electronic Clearing System (ECS), Mobile Wallets, Prepaid Cards, Debit Cards, Credit Cards, Unstructured Supplementary Service Data (USSD), and AADHAAR Enabled Payment System (APES). At present, of all these ways, three ways of payment have turned out to be the most popular and those are UPI, NEFT and IMPS.

While UPI has become the most common and popular way to transfer money in India, the two other payment systems, namely, NEFT and IMPS, are also getting quite popular and are being used to transfer huge amounts of money in volumes as well as values. IMPS and NEFT collectively account for at least a value ₹35 trillion a month.

National Electronic Funds Transfer or (NEFT) is operated by the RBI while Immediate Payment Service (IMPS) and Unified Payment Interface (UPI) are operated by National Payment Corp. of India. Besides funds transfer, NEFT can be used for a variety of transactions. It includes payment of credit card dues to the card issuing banks, payment of loan EMI, inward foreign exchange remittances, etc. The transaction has legal backing. It can be also used for one-way funds transfers from India to Nepal.

As per data released by RBI, NEFT has the largest average transaction value followed by IMPS and then UPI. The total NEFT volume recorded in October 2013 was 113.8 million transactions whereas the volume in July 2022 was 803.7 million transactions. The RTGS transaction volume also grew from 13.9 million transactions in October 2013 to around 38 million in July 2022. The UPI transaction volume increased from 9,964.61 million in October 2022 to 7,305.42 million in October 2023.

However, there are significant drops in the average ticket size of NEPT, IMPS and UPI. NEFT witnessed the largest drop of 17.5% in average ticket size during the 12-month period to September 2023 and 7% in September 2022. For UPI, this drop was 10% in September 2023 and 9.5% in September 2022. It is interesting to note that the average ticket size for IMPS has been increasing since the last two years. The ticket size of IMPS grew 9% and 18% during these two periods.

It is interesting to note that the growth in digital transactions is slowing down but as far as the high value transactions concerned, NEFT still remains the preferred method of transaction even after an increase in the limit for UPI transactions to ₹1 Lakh. UPI still remains the preferred payment method for small value transactions but IMPS is gaining more acceptances and ticket size is increasing.

Rajeev K Upadhyay