Prime Minister Narendra Modi’s recent visits to France and UAE resulted in two major avenues for India’s digital payment system, the Unified Payments Interface (UPI), for international forays.
On July 14, the PM announced in Paris that Indian tourists would be able to make Rupee payments using UPI from atop the Eiffel Tower as an agreement has been made for usage of UPI in that country. A day later in Abu Dhabi, the Reserve Bank of India (RBI) and the Central Bank of the United Arab Emirates (CBUAE) signed a Memorandum of Understanding (MoUs) to establish a framework for promoting the use of local currencies for interlinking their payment and messaging systems. Under the MoU, the two central banks agreed to cooperate on linking their Fast Payment Systems (FPSs) – UPI with the Instant Payment Platform (IPP) of UAE – and this linkage will enable the users in either country to make fast, convenient, safe, and cost-effective cross-border funds transfers. A day later, Indonesia’s Finance Minister confirmed that India and Indonesia are discussing to get their digital payments systems work together.
These international forays for UPI are significant as India engages with the global community to ensure that digital payment systems take the centre stage of payments made to not only ease secure transactions but also stop payment related crimes. Bhutan was the first country to adopt UPI in 2021 when Indian tourists were able to make UPI-based payments in that country. In October 2022, Oman formally embraced UPI for digital transactions across platforms. On February 21 this year, UPI was integrated with Singapore’s PayNow which allowed instantaneous transfers on a reciprocal basis. After Singapore, Bhutan is the second nation to have the UPI acceptance at merchant locations.
Know how UPI revolutionised the financial transactions
UPI system has revolutionised the way financial transactions are conducted in the country. Launched in April 2016 by the National Payments Corporation of India (NPCI), UPI has emerged as a game-changer, simplifying peer-to-peer payments, enabling seamless fund transfers, and promoting financial inclusion. Today it accounts for almost 40 per cent of the global digital payments made in a day and in the last couple of months have been clocking more than 9 billion transactions a month worth Rs 14 lakh crore. A recent report from PricewaterhouseCoopers (PwC) has mentioned that UPI transactions are likely to reach 1 billion transactions per day by 2026-27, accounting for 90 percent of the retail digital payments in the country.
UPI bridges the gap between the banked and unbanked population
The UPI payment system has played a vital role in advancing financial inclusion in India and has empowered individuals, regardless of their socio-economic background, to participate in the digital economy. This inclusivity has bridged the gap between the banked and unbanked population, enabling even those without traditional banking facilities to engage in digital transactions. UPI has simplified the process of making payments and fund transfers. Users can link their bank accounts to UPI and create a Virtual Payment Address (VPA) that serves as their unique identifier. This eliminates the need to remember complicated bank account numbers and reduces the dependency on cash transactions. The intuitive user interface and real-time transaction processing have made UPI the go-to payment method for individuals and businesses alike.
UPI’s open architecture and robust API ecosystem have fostered a thriving FinTech ecosystem in India. The UPI platform allows third-party applications to integrate seamlessly, leading to the development of innovative payment solutions. Numerous FinTech startups have emerged, leveraging UPI’s infrastructure to offer unique services such as bill splitting, expense management, and investment platforms.
Advantages of UPI while doing transactions globally
The foreign collaborations for UPI has many advantages. Firstly, collaboration between UPI and foreign payment systems enables seamless interoperability between different countries’ payment platforms. This allows Indian users to transact with individuals and businesses abroad using UPI, reducing the need for multiple payment methods and enhancing convenience.
Secondly, by integrating UPI with international payment systems, foreign collaborations are facilitating cross-border trade for Indian businesses. It is enabling secure and swift payments from customers overseas, eliminating the complexities associated with traditional international transactions and reducing costs.
Thirdly, the collaboration with foreign payment systems helps to accelerate the digitisation of the Indian economy. It provides users with access to a wider range of global services and enhance financial inclusion by enabling seamless digital payments for individuals and businesses, both domestically and internationally.
Fourthly, foreign collaborations in the UPI ecosystem will attract international investors and promote foreign direct investment (FDI) in India’s digital payment sector. This can fuel innovation, drive technological advancements, and create opportunities for startups and businesses in the Indian market.
Fifthly, the collaborations with foreign payment systems can facilitate the transfer of knowledge, expertise, and technology. India’s success story in building such a large secure system definitely will help many countries particularly in the global south to build their own systems optimally. Collaborations can play a crucial role in advancing financial inclusion initiatives.
UPI has already proven to be a game-changer in promoting digital payments within India, and foreign collaborations can extend these benefits to under-banked populations globally, providing them with secure and accessible financial services. Even Indian organisations will be benefited to learn from international best practices, adopt advanced security measures, and improve their payment infrastructure, leading to overall growth and development in the digital payment ecosystem.
Finally, foreign collaborations enhance the reputation of UPI on a global scale. By aligning with established international payment systems, UPI gains credibility and recognition, making it more attractive for users and businesses worldwide.
Important to protect data security, local laws and regulations
It is pertinent to note that while foreign collaborations can bring significant advantages, they should be carefully regulated to ensure data security, privacy, and compliance with local laws and regulations. Collaborations should be designed to benefit all stakeholders and promote a transparent and inclusive digital payment ecosystem. Since digital payment systems have proper footsteps, money laundering is not possible using these networks. However countries have to ensure that they have sufficient controls and regulations to see that their banking system is not misused by criminal and terrorist elements to transfer money.
UPI being a gamechanger is an inspiration for the world
India’s successful implementation of the digital technologies on many fronts in large-scale architectures and in a secure manner is now being recognised across the world. PM Modi’s focus on technology to connect and empower citizens across the economic divide ever since he came to power has been a very rewarding experience. This experience is being widely proposed by India as part of its G20 presidentship to the world for adaptability so that more digital and economic inclusivity is seen across the globe.
The India Stack offering is a very pertinent initiative as it allows many countries to build their digital pic infrastructure on which their economies are built and many sectors develop concurrently.
Clearly the success of UPI serves as an inspiration for other countries seeking to build efficient and inclusive payment systems for the future. This is what PM Modi and his Government also wants to support sincerely.
