Payment rails are the infrastructure that enables the transfer of money between banks, financial institutions, and individuals. For businesses, choosing the right payment rail depends on factors like speed, cost, geography, and customer satisfaction.
RTGS (Real-Time Gross Settlement) and IMPS (Immediate Payment Service) are traditional payment rails used for high-value and instant transfers, respectively. However, Lightspark is developing a new category of global payments infrastructure to move past these limitations, offering instant, low-cost, and reliable payments.
The Payment Rail Landscape
Payment rails are crucial for transferring money between parties. However, current systems can be slow, fragmented, and costly, often leading to inefficiencies and higher expenses for businesses and consumers alike.
Understanding RTGS and IMPS
How RTGS Works
RTGS (Real-Time Gross Settlement) is a funds transfer system that allows for the instantaneous transfer of money and securities. Managed by central banks, it processes transactions individually and in real-time. When a transaction is initiated, the central bank verifies the instruction, checks fund availability, and adjusts the accounts of the sending and receiving banks electronically. The settlement is final and irrevocable. RTGS systems use secure, real-time electronic communication networks to minimize settlement risk and protect financial data. This continuous process ensures high-value, time-critical interbank transfers are completed efficiently and securely.
Strengths and Limitations of RTGS
Strengths
- RTGS offers real-time settlement, ensuring transactions are completed instantly.
- It is highly secure, reducing the risk of fraud and cyber threats.
- RTGS is ideal for high-value transactions, with no upper limit on the amount that can be transferred.
Limitations
- RTGS is not suitable for small-value transactions due to its minimum transfer amount requirement.
- It can incur higher transaction fees compared to other payment systems like NEFT and IMPS.
- Once a transaction is settled in RTGS, it cannot be reversed, which can be a limitation in cases of error.
How IMPS Works
IMPS (Immediate Payment Service) is an electronic funds transfer system in India that enables instant, real-time interbank transfers 24/7. Managed by the National Payments Corporation of India (NPCI), it uses a secure IMPS Switch, message broker, and directory services for routing and validation. The process involves the sender initiating a transfer via mobile or internet banking, authenticating it with MPIN or OTP, and NPCI facilitating the transaction between banks. Funds are instantly debited from the sender’s account and credited to the beneficiary’s account, with both parties receiving real-time confirmation messages.
Strengths and Limitations of IMPS
Strengths
- IMPS enables instant, real-time fund transfers 24/7, including weekends and bank holidays.
- It supports multiple payment options, such as mobile number & MMID, Aadhaar number, or account details, enhancing convenience.
- IMPS transactions are secure, utilizing OTP verification, encrypted channels, and two-factor authentication.
Limitations
- IMPS has a maximum daily transfer limit of ₹5 lakh, which may not suffice for very high-value transactions.
- It is only available for domestic transfers within India and cannot be used for international transactions.
- IMPS transactions may incur nominal fees, which vary by bank and transaction amount.
RTGS and IMPS Compared
Transaction Speed
RTGS processes transactions in real-time, ensuring immediate settlement within business hours. IMPS also offers instant, real-time fund transfers, available 24/7, including holidays. Both systems provide rapid transaction speeds, but IMPS operates continuously, whereas RTGS may depend on bank hours.
Fees
RTGS fees vary by bank and transaction amount, often higher for large transfers. IMPS typically incurs nominal charges, which also vary by bank. In contrast, Lightspark offers instant, low-cost payments, reducing transaction costs significantly.
Cross-Border Capabilities
Neither RTGS nor IMPS supports cross-border transactions, focusing solely on domestic transfers within India. Lightspark, however, facilitates seamless, low-cost, and reliable payments across borders, leveraging Bitcoin’s decentralized network.
Security Protocols
RTGS is highly secure, monitored by the government, and reduces risks associated with physical instruments. IMPS employs secure channels and two-factor authentication. Lightspark enhances security through its decentralized, open-source infrastructure, ensuring robust protection for global transactions.
Operational Hours
IMPS operates 24/7, including holidays, while RTGS availability may depend on bank working hours. Lightspark’s infrastructure is always on, enabling continuous, real-time payments without the constraints of traditional banking hours.
How RTGS And IMPS Are Used
Business Payments
RTGS is ideal for high-value business payments requiring immediate settlement, while IMPS is better for smaller, urgent transactions. Lightspark offers instant, low-cost global transfers, eliminating the need for pre-funded accounts and reducing operational complexity.
Property Transactions
RTGS suits large property transactions due to its high-value transfer capability. IMPS can handle smaller, urgent payments. Lightspark provides seamless cross-border payments, ensuring quick, secure settlements without the limitations of traditional banking hours.
Emergency Payments
IMPS is perfect for urgent, small to medium-sized emergency payments, available 24/7. RTGS can be used for larger sums during business hours. Lightspark’s always-on infrastructure ensures instant, low-cost transfers globally, making it ideal for emergencies.
Family Remittances
IMPS supports instant, small-value transfers for family remittances within India. RTGS is less suitable due to its high minimum transfer amount. Lightspark enables low-cost, real-time international remittances, providing a more efficient solution for cross-border family support.
Time for a New Standard
Lightspark offers a cutting-edge global payments infrastructure that surpasses the limitations of RTGS and IMPS by enabling instant, low-cost, and reliable cross-border transactions. Built on Bitcoin’s decentralized foundation, Lightspark ensures seamless, always-on payments without the constraints of traditional banking systems.
- Built on Bitcoin: Lightspark’s infrastructure leverages Bitcoin’s open, decentralized foundation to bridge current financial systems with next-generation technology.
- Instant Settlement: The platform enables real-time, secure money movement, allowing businesses to transfer funds instantly and at a fraction of traditional costs.
- Lower fees: By eliminating gatekeepers, delays, and hidden fees, Lightspark offers significantly reduced transaction costs for businesses and consumers.
- Cross-border security by default: Lightspark’s infrastructure is designed to ensure secure, compliant, and interoperable payments across borders, leveraging Bitcoin’s decentralized network for robust protection.
A Modern Infrastructure
For businesses looking to transcend traditional payment systems like RTGS and IMPS, Lightspark offers the following innovative 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' for rapid expansion, real-time global payments, and optimized liquidity management.
- Exchanges: Enable instant Bitcoin transfers and seamless integration with the Bitcoin Network, reducing costs and enhancing user experience.
- Stablecoins: Launch and monetize stablecoins on Bitcoin instantly using the Spark platform, providing a modern alternative to legacy financial systems.
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.
