The interbank mobile payment service enables bank customers to make most payments using their mobile phone handsets. Seven banks have adopted the system and several more are joining up

The National Payments Corporation of India (NPCI) on Monday launched its much-awaited interbank mobile payment service (IMPS), which has the potential to change the payments scenario in the country. According to bankers, this system could revolutionise the retail payments process and even overtake the number of payment transactions carried out through cards and the internet.

Shyamala Gopinath, deputy governor of the Reserve Bank of India (RBI), said, "We have permitted about 40 banks to offer mobile payments to their customers. The IMPS has the potential to change retail payment scenario in the country."

Although, at present, IMPS is restricted to interbank transactions, it can be used by anyone and anywhere to make a payment. For example, one can pay the grocery bill to the shop owner through mobile, provided both are registered IMPS users with their respective banks. Similarly, one can pay a taxi fare to the taxi driver, directly through IMPS. So, IMPS paves the way for all kinds of payments through banks, from a mobile handset.

At present, Axis Bank, Bank of India, HDFC Bank, ICICI Bank, State Bank of India, Union Bank of India and Yes Bank offer IMPS to customers. Seven other banks are in the process of going live with the service and some 20 banks are at an early stage of adopting IMPS, said AP Hota, managing director and chief executive, NPCI.

In India, there are more than 60 crore mobile phone subscribers, but there are less than 20 crore 'active' bank accounts. Although on record there are about 31 crore savings bank accounts, many of them are either multiple accounts or they are not operational. IMPS could help revive these accounts.

NCPI and the banks enrolled for IMPS currently offer this service free of cost. However, after March 2011 NPCI proposes to charge banks at 25 paise per transaction. It will be up to the banks to decide whether to charge customers for this service, said M Balakrishnan, chief operating officer of NPCI.

He said NPCI has provided a centralised switching system for banks and it is up to the banks to provide a mobile-based application or SMS option for using IMPS. As of now, most of the banks enrolled for IMPS are providing a Java-based mobile application for end customers. Those who do not have Java-based application in the handsets could use the SMS option.

According to RBI guidelines, a customer can transact up to Rs50,000 a day through IMPS, provided he/she is using end-to-end encryption (provided by the bank). Transactions up to Rs1,000 a day can be facilitated by banks without end-to-end encryption.