Real-time payments explained: How money moves between bank accounts in seconds
Benchmarks Nifty22,600.00-87.66FEATURED FUNDS★★★★★UTI Aggressive Hybrid Fund Regular Plan-Growth5Y Return8.69 % Invest NowFEATURED FUNDS★★★★★Motilal Oswal Midcap Fund Direct-Growth5Y Return18.25 % Invest NowEnter search…
Real-time payments allow money to move between bank accounts within seconds, making transactions faster and more convenient for consumers and businesses. In India, systems such as UPI and IMPS enable instant transfers, while RTGS processes high-value payments in real time. Here is how these systems work, the technology that powers them, their benefits for businesses and customers, and the security challenges.
When a customer scans a QR code at a neighbourhood shop, enters a UPI PIN and receives a payment confirmation almost immediately, the transaction may look simple. Behind that familiar experience, however, several systems work together to verify the payment, communicate with banks and update account balances.India's digital payments ecosystem has made this experience commonplace. Unified Payments Interface (UPI), developed by the National Payments Corporation of India (NPCI), enables instant money transfers between bank accounts, around the clock. The technology has also changed what customers expect from banking. Waiting for the next working day to send or receive money is no longer the default for many digital transactions. But what exactly happens when money moves between two bank accounts in seconds? And why does making payments faster require so much work behind the scenes?
What are real-time payments?
Real-time payments are electronic transactions that allow money to move between accounts within seconds, with the payment system processing the transaction immediately rather than waiting for a scheduled processing window.
For customers, this means they can send money to another person, pay a merchant or transfer funds without visiting a bank branch. The recipient can generally access the money shortly after a successful transaction, depending on the payment system and the banks involved.
Live Events
In India, UPI and the Immediate Payment Service (IMPS) are examples of systems that facilitate instant transfers. The Reserve Bank of India's Real Time Gross Settlement (RTGS) system also processes transfers in real time, although it is designed primarily for large-value payments and has a minimum transaction amount of ₹2 lakh.
NEFT, meanwhile, is available 24 hours a day but processes transactions in half-hourly batches. This distinction shows why round-the-clock availability and real-time processing are not necessarily the same thing.
How does money move in seconds?
Consider a customer paying ₹500 to a shopkeeper through UPI. Although the customer may only need a few taps on a smartphone, the transaction involves several steps.
1. The customer initiates the payment
The customer scans the merchant's QR code, enters the amount and selects the bank account to pay from. The app identifies the recipient using the payment details associated with the QR code.
2. The payment is authorised
The customer enters the UPI PIN to authorise the transaction. The payment system and participating institutions process the request, applying the relevant authentication and transaction checks.
3. The payment request reaches the banking system
The payment infrastructure routes the transaction to the relevant bank. The payer's bank checks the request and the available funds before proceeding with the transfer, subject to applicable controls.
4. The transaction is processed
Once the necessary checks are completed, the payment is processed through the participating institutions and payment infrastructure. The recipient's bank receives the transaction information and processes the credit.
5. Both parties receive confirmation
The customer sees whether the transaction was successful, while the merchant can check the payment status. When the transaction succeeds, the recipient's account is credited according to the system's processing arrangements.
The entire process can take only a few seconds. That speed depends on the payment network, participating banks and the systems handling the transaction. A technical issue or temporary disruption can still cause a payment to remain pending or fail.
Why is real-time finance becoming important?
The benefits go beyond convenience. Faster payments can influence how households, merchants and businesses manage their money.
For small businesses, receiving customer payments quickly can help improve access to working capital. A shopkeeper may need the money collected during the day to pay a supplier, replenish inventory or meet other expenses. Faster access can reduce the time spent waiting for funds, although it does not eliminate cash-flow problems.
Businesses can also use faster payment systems to streamline collections and payments. When financial information is updated promptly, they can make decisions using a clearer picture of the money available in their accounts.
For consumers, instant payments make it easier to split bills, pay rent, settle emergency expenses and transfer money to family members without depending on conventional banking hours.
The technology challenge behind instant payments
Making a payment system fast is only one part of the task. Banks must also ensure that it remains reliable, secure and capable of handling transactions at scale. Santhi Kumar Terli, Senior Vice President and Apps Development Group Manager at Citi, says the move towards real-time finance changes the way financial systems must be designed.
"Real-time finance changes the engineering problem because the expectation is no longer that a system will process something eventually. It has to respond correctly while the transaction is happening. That means speed has to work alongside reliability, risk controls and compliance. In large financial systems, the difficult part is building infrastructure that can continue operating at scale without compromising those controls," Terli says.
This challenge becomes more complex as payments increasingly take place outside traditional working hours. Banks need systems that can remain available through nights, weekends and holidays while monitoring transactions and responding to operational problems.
They must also coordinate with payment networks, other banks and technology providers. Even a brief disruption can affect customers and businesses that rely on digital payments to complete everyday transactions.
Can instant payments be risky?
Faster payments do not automatically mean safer payments. In some situations, money can reach the recipient before a bank has an opportunity to investigate a suspected fraud in depth. Banks therefore work on balancing speed with authentication, transaction monitoring and other risk controls. Customers also have a role to play. They should verify the recipient's details before authorising a transfer, never share their UPI PIN and avoid approving payment requests they do not recognise.
Instant payments versus traditional bank transfers
The key difference lies in how transactions are processed and when funds become available. Traditional payment methods, such as paper cheques, can involve physical handling, verification and processing delays. Some electronic systems also use scheduled processing windows or batches.
Real-time payment systems are designed to process transactions individually as requests arrive, allowing successful transfers to be completed within seconds. However, not every electronic transfer follows the same model. NEFT, for example, is available throughout the day but operates in batches, while RTGS processes transactions individually in real time.
Add as a Reliable and Trusted News Source Add Now!
(You can now subscribe to our Economic Times WhatsApp channel)
Read More News oninstant money transfersbank transferspayment processingImmediate Payment Service
(Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.)
...moreless(You can now subscribe to our Economic Times WhatsApp channel)
Read More News oninstant money transfersbank transferspayment processingImmediate Payment Service
(Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.)
...morelessContinue reading with one of these options:Limited AccessFreeLogin to get access to some exclusive stories& personalised newslettersLogin NowUnlimited AccessStarting @ Rs120/monthGet access to exclusive stories, expert opinions &
in-depth stock reportsSubscribe NowET
Unlock Access to All Exclusives with ETPrime FREE TRIAL
15 Days Free: Unlock All ETPrime Exclusives, Market Tools & ePapers
Trial offer expiring in00 : 05 : 00
I'd rather pay ₹2599 nowUh-oh! This is an exclusive story available for selected readers only.
Worry not. You’re just a step away.
Prime Account Detected!
It seems like you're already an ETPrime member with
Login using your ET Prime credentials to enjoy all member benefits
Log out of your current logged-in account and log in again using your ET Prime credentials to enjoy all member benefits.
Unlock ETPrime's Exclusive Stories Today!
Big Price Drop! Flat 40% Off
Student Only OfferAlready a Member? Sign In nowAlready a Member? Sign In nowAlready a Member? Sign In nowOffer Exclusively For You
Save up to Rs. 700/-
ON ET PRIME MEMBERSHIP
Avail OfferOffer Exclusively For You
Get 1 Year Free
With 1 and 2-Year ET prime membership
Avail OfferOffer Exclusively For You
Get 1 Year Free
With 1 and 2-Year ET prime membership
Avail OfferOffer Exclusively For You
Get Flat 40% Off
Then ₹ 1749 for 1 year
Avail OfferOffer Exclusively For You
ET Prime at ₹ 49 for 1 month
Then ₹ 1749 for 1 year
Avail OfferSpecial Offer
Get flat 40% off on ETPrime
Avail OfferAvail OfferClaim NowAlready a Member? Sign In nowNeed Assistance?
Connect with an ETPrime expert for personalized support and guidance
+91 9484700004'; }); } if(listing) { var h3 = "You tried reading " + listArr.length + " locked stories in the past " + threshold + " days.", h4 = "Become an ET Prime member and don't miss out on these exclusive stories."; var html = '' + h3 + '
' + h4 + '
- ' + listing + '
What’s Included with
ETPrime Membership
1Exclusive Insights That Matter
Uncover the truth with our investigative stories
Make strategic moves using the real-world case studies
Read industry-specific stories to identify emerging trends
Spot opportunities with in-depth insights that matter
Trump temper on H-1B visas is forcing Indians to do these things to stay put in US
What Adani’s US indictment means for India Inc’s overseas fundraising
Why veterans like Reliance, L&T are on acquisition spree? Aswath Damodaran has an answer.
Will China’s dollar bond sale in Saudi Arabia trump the US in financial world?
Huawei launches its own OS to compete with Google and Apple. But can it win beyond China?
The problem with lab grown diamonds
Why a falling rupee is a better option for the economy
A list of top 20 momentum stocks that have delivered massive returns in one year
2Invest Wisely With Smart Market Tools & Investment Ideas
Alpha Trade
Get daily trade ideas from SEBI-registered research analysts.
Investment Ideas
Grow your wealth with stock ideas & sectoral trends.
Stock Reports Plus
All-in-one stock research with Stock Score, peer comparison & key signals.
BigBull Portfolio
Get to know where the market bulls are investing to identify the right stocks.
Stock Analyzer
Check the score based on the company's fundamentals, solvency, growth, risk & ownership to decide the right stocks.
Market Mood
Analyze the market sentiments & identify the trend reversal for strategic decisions.
Stock Talk Live at 9 AM Daily
Ask your stock queries & get assured replies by ET appointed, SEBI registered experts.
3Stay informed anytime, anywhere with ET ePaper
ePaper - Print View
Read the PDF version of ET newspaper. Download & access it offline anytime.
ePaper - Digital View
Read your daily newspaper in Digital View & get it delivered to your inbox everyday.
Wealth Edition
Manage your money efficiently with this weekly money management guide.
TOI ePaper
Read the PDF version of TOI newspaper. Download & access it offline anytime.
Deep Explainers
Explore the In-depth explanation of complex topics for everyday life decisions.
Health+ Stories
Get fitter with daily health insights committed to your well-being.
Personal Finance+ Stories
Manage your wealth better with in-depth insights & updates on finance.
5Enjoy Complimentary Subscriptions From Top Brands
Stream new documentaries from all across the world every day.
Stories you might be interested in
Figures reflect the source report and its stated period. This article is for information and is not investment advice.
