April 26, 2023

Money Transfer

Transferring funds electronically from one bank account to another, within and across geographic borders, quickly, safely and securely, for a whole host of reasons ( medical emergencies, vacation spends, shopping et al) is increasingly becoming the preferred channel in an increasingly digitised borderless world. Welcome to this concept of money transfer.
The transactions can be executed through different payment gateways and the selection of your preferred payment gateway would depend upon the following:
  • Threshold amount to be transaction
  • Time taken for the the transaction to complete.
  • Service charge levied by the financial entity.
  • Risk involved
  • Access to internet/mobile banking
  • Trackability of your transaction
  • Having the correct beneficiary details is important to complete the transfer.
  • Exchange rate incase of international money transfers.

Money transfer channels:

  • NEFT
    • RTGS
    • IMPS
    • Digital Wallet- Gpay, Phonepe,Paytm etc
    • UPI
    • Bank transfer
    • Transferring money via agents like MoneyGram, Payoneer etc.
    • Bank drafts
    • ChequeNEFT- Introduced in November 2005 by the RBI, it allows retail customers across India to transmit funds electronically from one bank branch-enabled account to either the same or any other bank within India. This service is available 24x7 ( with effect from Dec 16, 2019 as per RBI guidelines), every time, everywhere, everyone. Such transactions are settled on a near real-time basis, throughout the day. As per the RBI guidelines, there is no minimum daily threshold cash limit; customers can transmit an amount as low as ₹1 per day. Even with regard to the maximum threshold fund limit, the RBI has not pegged any figure.
RTGS- Real-time Gross Settlement ( RTGS) as the name indicates, is an RBI backed payment gateway wherein the settlement of payments occurs on real-time basis, with the amount being transferred to the payee's account within a span of 30 minutes from the initiation of payment. The faster processing time is also due to the settlement process, as the fund transfer amount is settled individually, on a gross basis, without netting, rather than in batches, as in the case of the NEFT The minimum threshold transaction amount is ₹2 lakh. On the other hand, there is no maximum limit on the transaction amount.
IMPS- The Immediate Payment Service was introduced in 2010 by NPCI. This real time, 24X7, economical, safe and secure, interbank electronic fund transfer service is available on multiple channels such as Mobile, Internet, ATM, SMS. Currently the IMPS ecosystem comprises 674 members, including banks & PPIs.
Digital Wallet- Gpay, Phonepe,Paytm etc In simple words, an e-wallet or digital wallet functions just like your physical wallet where money moves in and out to carry out various activities. The only difference is that in e-wallet, the cash exchange happens electronically. Fund transactions via digital wallets such as Gpay, Paytm, Phonepe, Amazon money, Jio money, Ola Money etc. can be accessed 24*7 and carry zero service charge.
UPI - or the Unified Payments Interface is a real-time payment gateway to transfer funds between two accounts which can be accessed via mobile device, anytime, anywhere. Developed and facilitated by National Payments Corporation of India (NPCI) in 2016, UPI supported a number of transactions such as inter-bank and peer-to-peer (P2P) person-to-merchant (P2M) transactions. The UPI ecosystem within India, currently registers~ 220 million transactions per day.
Bank transfer or wire transfer- Through this system, money is transferred across borders over the messaging protocol platform called SWIFT ( Society for worldwide interbank telecommunication network). It is a safe and secure channel for both inward and outward remittances.Typically, domestic wire transfers take a day while international wire transfers take five days or more.

Transferring money via agents like Western Union, MoneyGram, Payoneer etc.

Third party service providers like Western Union, MoneyGram, Payoneer etc. provide money transfer services through online and offline mode, inbound and outbound, through their exhaustive network of agents and offices across countries, worldwide.

You have two options to receive money

  • Cash - at an agent location
  • Direct credit to your account
These services are chargeable, the amount of which varies depending upon a variety of factors such as the sender's and beneficiary's location, the channel of transfer-offline or online, and the delivery time.

Some of the other online money transfer companies comprises

  • Transfast
  • Remitly
  • ICICI Money2India
  • Zenbanx
  • TransferWise
  • Axisremit
  • Remit2India
  • State Bank of India Money Transfer
  • RIA Money Transfer
  • WorldRemit
  • USForex
  • Indus Fast Remit
  • Xoom
  • Worldfirst
  • Moneycorp
Bank Draft- an alternative to physical cheques, Bank Draft , guarantees payment to the recipient. This channel of money transfer is typically used by international buyers or sellers who wish to guarantee the payment of funds.
Cheque- This is the traditional non-cash channel of transfering funds from the drawer's ( sender) account to the drawee's account ( receiver).

FAQs:

What are the potential risks for online money transfers?

Notwithstanding the layered security architecture deployed by financial entities to ensure safe and secure fund transfers, the online channel is subject to potential risk with regards to hacking of sensitive account related information, misuse of your password and login id by fraudsters etc.
Online money transfer is risky in

What is the consequence and remedial action to money transferred online to an erroneous account?

In such a scenario, you would have to forfeit your money. Therefore, it is extremely critical that you always type the correct credentials of the beneficiary.

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