Taking UPI Global – What it Means for India

Unified Payment Interface (UPI), a real-time payment system owned and developed by the National Payments Corporation of India (NPCI), has disrupted digital peer-to-peer (P2P) and peer-to-merchant (P2M) financial transactions in India over the last six years. Adoption has increased multifold on the back of fee-free payments, with the transaction volume growing 90% from 38b in 2021 to 74b in 2022 with the corresponding value increasing 76% to $1,533b (INR126t) from $880b in that same period. For the geographically diverse and complex Indian market, the success of the system is remarkable as it brought digital payments closer to the public (especially the non-tech savvy) and propelled the growth of a cashless economy.

Growing acceptance and popularity boosted NPCI to test the waters internationally by partnering with central banks and payment service providers (PSPs) in several countries. With estimated 18m expats, India has been the largest receiver of remittance in the world since 2008, receiving $89b (INR~7t) in 2021. UPI’s global expansion focuses on countries which witness either high Indian tourist visits or have significant population of students or working professionals (for example, people in US and UAE are the biggest remitters to India).

During Arp2021-Mar2023, NPCI expanded globally by partnering with multiple countries including Bhutan, Singapore, Malaysia, Thailand, Philippines, Vietnam, Cambodia, Hong Kong, Taiwan, South Korea, Japan, Qatar, USA, Oman, UAE and UK to allow remittances through UPI. NPCI’s partnership with Worldline allows P2M transactions in BENELUX (Belgium, Netherlands and Luxembourg) and Switzerland through QR codes for mobile payments of Indian tourists in Europe. Also, the latest partnership with Singapore’s PayNow allows P2P remittances and vice-versa. Further, NPCI will pilot Prepaid Payment Instruments (PPI) wallets for international travelers from G20 nations arriving in India at Bengaluru, New Delhi, and Mumbai international airports.

Although UPI has started expanding internationally, it is not without its share of challenges. A few countries, including Canada, have been reluctant to accept UPI due to a strong pushback from American payment networks – Visa and Mastercard. Similarly, Europe, with its own account-to-account fund transfer system enabled by BNP Paribas, would not want any new entrant to threaten its dominance. Further, Brazil prefers to push its PIX system, which does not regulate merchant fees and thus may be more sustainable in the long term.

Zero transactional charges embraced by UPI are not long-lived as it plans to charge 1.1% interchange charge on merchant transactions (P2M) over INR 2,000 done through PPI wallets and Cards on UPI (borne by the merchant). This may result in Indian merchants to simply move back to cash transactions, shunning the UPI route. Further, foreign banks and service providers may not be willing to join the UPI project without passing the cost of Merchant Discount Rate (MDR) to the consumer.

While there are challenges to UPI uptake in the international market, NPCI is trying to mitigate them by partnering with robust private financial institutions such as Mashref Bank (NEOPAY), one of the largest banks in UAE, and Societe Generale (PayXpert). Apart from partnerships, the UPI system allows entry of digital payment apps (such as GPay and PayTM) which can help the companies earn from forex. These platforms also enable firms to acquire customers and offer cross-selling products such as travel insurance, loans, international hotel and travel partnerships, and various other services.

India is rapidly becoming a leader in fintech innovation, but it may be too early to predict whether UPI will succeed globally. Partnering with 13 countries is just the beginning and many more international banks, payment service providers, and merchants are likely to join hands with UPI, making it easier for Indian users to conduct business globally.

Author: Shivam Agarwal,

Assistant Consultant, Strategy Consulting