Remittance of funds has ever been the core function of banking sector. The Indian payment systems have long  been dominated by paper-based transactions. Ever since the introduction of e-payments in India, the banking sector has witnessed growth like never before. The followings are the modes of remittance of funds:-

Bank Draft

Bank Draft is a paper based mode of transfer of funds and have long been used by the banking sector in India. In the present environment, it is on the verge of getting extinct.

Electronic Clearing Service (ECS Credit)

Known as "Credit-push" facility or one-to-many facility, this method is used mainly for large-value or bulk payments where the receiver’s account is credited with the payment from the institution making the payment. Such payments are made on a periodical-basis like a year, half a year, etc. and used to pay salaries, dividends or commissions. Over time it has become one of the most convenient methods of making large payments.

Electronic Clearing Services (ECS Debit)

This many-to-one or "debit-pull" method of remittance  is used mainly for small value payments from consumers/ individuals to big organizations or companies. It eliminates the need for paper and instead makes the payment through banks/corporates or government departments. It facilitates individual payments like telephone bills, electricity bills, online and card payments and insurance payments.

Credit cards and Debit cards

Card payments form an integral part of e-payments  because customers make many payments on their card-paying their bills, transferring funds and shopping.

Real-time gross settlement  (RTGS)

 Real Time Gross Settlement is a funds transfer mechanism where transfer of money takes place from one bank to another on a 'real time' and on 'gross' basis. This is the fastest possible money transfer system through the banking channel. Settlement in 'real time' means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. 'Gross settlement' means the transaction is settled on one to one basis without bunching with any other transaction. Considering that money transfer takes place in the books of the Reserve Bank of India, the payment is taken as final and irrevocable.

National Electronic Funds Transfer (NEFT)

The National Electronic Fund Transfer (NEFT) system is a nationwide system that facilitates individuals, firms and corporates to electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch.  It is done via electronic messages. Even though it is not on real time basis like RTGS,   batches on half hourly basis are run in order to speed up the transactions.

Immediate Payment Service (IMPS)

Immediate Payment Service (IMPS) is an initiative of  National Payments Corporation of India (NPCI). It is a service through which money can be transferred immediately from one account to the other account, within the same bank or accounts across other banks. This facility can be availed 24X7 and on all public and bank holidays including RBI holidays.

P2P –Person to Person fund transfer (using Mobile number & MMID); P2A- Person to Account fund transfer (using Account Number & IFS Code); ABRS – Aadhaar Based Remittance Service (using Aadhaar number) can be carried out through IMPS.

Unified Payment Interface (UPI)

Unified Payments Interface (UPI) is a system that empowers multiple bank accounts of a particular bank  into a single mobile application merging several banking features, seamless fund routing & merchant payments into one hood. It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience. The benefits of UPI are:-

Push and Pull Payments

 UPI ID (‘Username@PSPName’)

(No need to share Bank account details)

 Transfer using Single identifier like Virtual Address or Aadhaar No

Banks – (Payment Service Provider) will provide App to customers of any bank

One App for all transaction needs

Single Click 2 Factor Authentication

SWIFT

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) provides a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment.

Short-coming with SWIFT system is that it does not facilitate funds transfer, it merely provides an encrypted message layer for the transaction. The messages generally flow sequentially, and  banks involved do not adopt straight through processing (STP).  The corresponding banks need to settle the transaction themselves. The whole procedure takes time.

Realizing that fintech market is ripe for disruption; SWIFT  have launched their Global Payments Innovation Initiative (GPII) which is basically a set of rules in order  to discipline  banks in the area of cross-border payments, supported by payment tracking and data to monitor adherence to these new rules.

Ripple

Ripple is a real-time gross settlement  system (RTGS), currency exchange and remittance network.

Ripple adopts blockchain technology for cross border payments.

Ripple relies on a common shared ledger, which is a distributed database storing information about all Ripple accounts. Ripple calls this Inter Ledger Protocol (ILP) and they have open sourced it to public domain.

The network is managed by a network of independent validating servers that constantly compare their transaction records. Servers could belong to anyone, including banks or market makers.

ILP allows Ripple to connect existing bank ledgers. This lowers barriers to entry. In effect, banks connect their core systems to the Ripple network – analogous to how they currently connect their core systems to the SWIFT network.