Payment rails are the infrastructure that enables the transfer of money between banks, financial institutions, and individuals. For businesses, selecting the appropriate payment rail hinges on factors such as speed, cost, geography, and customer satisfaction.
RTGS (Real-Time Gross Settlement) and UPI (Unified Payments Interface) are traditional payment systems that facilitate instant fund transfers within a country. However, Lightspark aims to transcend these systems by leveraging Bitcoin’s decentralized foundation to create a global, open, and always-on payment network.
The Payment Rail Landscape
Payment rails are crucial for moving money between parties, but current systems can be slow, fragmented, and costly, often leading to inefficiencies and delays in financial transactions.
Understanding RTGS and UPI
How RTGS Works
RTGS (Real-Time Gross Settlement) is a funds transfer system that allows for the instantaneous transfer of money and/or securities. Managed by central banks, it processes transactions individually and in real-time, ensuring immediate settlement. When a transaction is initiated, it is sent to the central bank's RTGS system, which debits the sender's account and credits the receiver's account instantly. This process eliminates the need for netting debits with credits, reducing settlement risk. RTGS systems, such as the U.S. Fedwire and the UK's CHAPS, are electronic and secure, providing a reliable infrastructure for large-value interbank transfers.
Strengths and Limitations of RTGS
Strengths
- RTGS allows for real-time, instantaneous settlement of transactions, ensuring funds are transferred immediately.
- It minimizes settlement risk by processing each transaction individually and in real-time, reducing the window of vulnerability to cyber threats.
- RTGS is highly secure and reliable, being managed and operated by central banks, which ensures the integrity and safety of high-value transactions.
Limitations
- RTGS transactions are subject to higher costs compared to other payment systems, making it less suitable for smaller transactions.
- It requires a minimum transaction amount, typically ₹2 lakh, which limits its use for low-value transfers.
- RTGS is not available 24x7 in all regions, as its operation is often restricted to business hours, depending on the central bank's policies.
How UPI Works
The Unified Payments Interface (UPI) is a real-time payment system developed by the National Payments Corporation of India (NPCI). It enables peer-to-peer inter-bank transfers through a mobile platform, using a two-click factor authentication process. UPI leverages existing systems like Immediate Payment Service (IMPS) and Aadhaar Enabled Payment System (AEPS) for seamless settlement. A typical UPI transaction involves logging into a UPI-enabled app, selecting the payment option, entering the recipient's virtual ID and amount, and authorizing the transaction with a UPI PIN. Both sender and recipient receive confirmation messages, ensuring a secure and efficient transaction process.
Strengths and Limitations of UPI
Strengths
- UPI enables real-time, peer-to-peer inter-bank transfers with a simple two-click authentication process, ensuring quick and efficient transactions.
- It eliminates the need to enter bank details or other sensitive information for each transaction, enhancing both convenience and security.
- UPI is available 24x7, including public holidays, making it highly accessible for users at any time.
Limitations
- UPI requires a smartphone and internet access, which may exclude users without such resources.
- The maximum transaction limit is typically ₹1 lakh per day, which may not be sufficient for high-value transfers.
- UPI transactions are dependent on the stability and security of the underlying apps and bank infrastructure, which can be susceptible to technical issues and outages.
RTGS and UPI Compared
Transaction Speed
RTGS processes transactions in real-time, typically within 30 minutes, making it ideal for high-value, urgent transfers. UPI, on the other hand, offers instant transactions, enabling quick peer-to-peer and merchant payments. Both systems provide rapid fund transfers, but UPI's speed and 24/7 availability give it a slight edge for everyday use.
Fees
RTGS transactions can incur fees, especially for offline transactions, with charges ranging from ₹25 to ₹50 plus GST for high-value transfers. UPI transactions are mostly free, making it a cost-effective option for users. Lightspark also emphasizes low-cost payments, offering a competitive alternative for global transactions.
Cross-Border Capabilities
Neither RTGS nor UPI currently support cross-border transactions, focusing instead on domestic transfers within India. In contrast, Lightspark leverages Bitcoin's decentralized network to facilitate seamless, low-cost international payments, bridging the gap left by traditional systems.
Security Protocols
RTGS is backed by central banks, ensuring a high level of security for large-value transactions. UPI, developed by NPCI, is secure for small transactions, utilizing features like OTP and PIN. Lightspark enhances security by leveraging Bitcoin's decentralized foundation and self-custodial wallets, ensuring robust protection for global payments.
Operational Hours
RTGS is available 24x7, including bank holidays, following recent regulatory changes. UPI also operates round the clock, providing continuous access for users. Lightspark similarly offers an always-on infrastructure, enabling real-time, global money movement without interruptions.
How RTGS And UPI Are Used
High-Value Business Transactions
RTGS is ideal for high-value business transactions due to its real-time settlement and security, but it incurs higher fees. UPI is less suitable due to its transaction limit. Lightspark offers a superior alternative with instant, low-cost global transfers, eliminating the need for high fees and delays.
Everyday Peer-to-Peer Transfers
UPI excels in everyday peer-to-peer transfers with its instant, 24/7 availability and no fees. RTGS is impractical for small amounts. Lightspark enhances this by enabling instant, low-cost transfers globally, making it perfect for frequent, small-value transactions without geographical limitations.
Cross-Border Payments
Neither RTGS nor UPI support cross-border payments, limiting their use to domestic transactions. Lightspark, leveraging Bitcoin's decentralized network, facilitates seamless, low-cost international payments, bridging the gap left by traditional systems and enabling businesses to expand globally.
Urgent High-Value Settlements
RTGS is suitable for urgent high-value settlements due to its real-time processing, but it is costly. UPI's transaction limit makes it unsuitable. Lightspark offers a better solution with instant, low-cost global transfers, ensuring quick and efficient settlements without the high fees associated with RTGS.
Time for a New Standard
Lightspark provides a global payments infrastructure that leverages Bitcoin’s decentralized foundation to enable real-time, low-cost, and secure cross-border transactions, surpassing the limitations of RTGS and UPI.
- Built on Bitcoin: Lightspark’s infrastructure is built on Bitcoin’s open, decentralized foundation, enabling seamless integration with Bitcoin and Lightning protocols.
- Instant Settlement: The platform supports real-time, global money movement for Bitcoin, fiat, and stablecoins, ensuring instant settlement.
- Lower fees: Lightspark facilitates low-cost payments across borders, eliminating hidden fees and reducing transaction costs.
- Cross-border security by default: Leveraging Bitcoin’s decentralized network, Lightspark ensures robust security for international payments, with built-in compliance features.
A Modern Infrastructure
For businesses looking to transcend traditional payment systems like RTGS and UPI, Lightspark offers the following solutions:
- Wallets: Build feature-rich digital wallets with flexible custody options, supporting Bitcoin, Lightning Network, stablecoins, and domestic payment rails.
- Digital Banks: Connect to the 'Money Grid' to expand into new markets, offer real-time global payments, and stay competitive with low fees and regulatory readiness.
- Exchanges: Seamlessly connect to the Bitcoin Network for instant Bitcoin transfers, lower costs, and built-in compliance tools.
- Stablecoins: Launch stablecoins on Bitcoin instantly with Spark, enabling fast, cheap, and user-friendly financial applications.
Emerging technologies and evolving regulations are reshaping the future of payments. Lightspark offers real-time, low-cost global payments, bridging traditional systems with next-gen tech. Don’t just choose between two outdated options—upgrade to a payment rail built for the internet age. Learn more or book a demo.
