Jan 31: The Unified Payments Interface (UPI) is a real-time payment system developed by the National Payments Corporation of India (NPCI) that enables seamless and secure transactions across multiple bank accounts. UPI has revolutionized the digital payments landscape in India, with tremendous growth in Digital payments at 13.24% in FY23, as per RBI index. Also, the digital payments transactions reached over 11,660 crores in the Financial year 2023.
But UPI is not just a domestic phenomenon. It has also opened up new avenues for cross-border payments, allowing Indian users to send and receive money from abroad with ease and convenience. UPI transactions are now available in 10 countries, including the US, UK, Canada, Australia, Singapore, UAE, Qatar, Bhutan, Nepal and Sri Lanka.
How does UPI work for international payments?
UPI works for international payments in two ways: inward remittances and outward remittances.
Inward remittances are when foreign users send money to Indian users through UPI. This can be done by using any of the UPI-enabled apps such as Google Pay, PhonePe, Paytm, WhatsApp, or BHIM. The foreign user simply needs to enter the recipient’s UPI ID or scan their QR code and authorize the payment with their PIN. The money is instantly credited to the recipient’s bank account in Indian rupees.
Outward remittances are when Indian users send money to foreign users through UPI. This can be done by using apps that have partnered with NPCI and foreign banks or payment service providers. For example, PhonePe has partnered with ICICI Bank and Wise (formerly TransferWise) to enable UPI-based outward remittances to over 200 countries. The Indian user simply needs to enter the recipient’s bank account details or email address and authorize the payment with their PIN. The money is converted to the recipient’s currency and credited to their bank account within minutes.
What are the benefits of UPI for international payments?
UPI offers several benefits for international payments, such as:
- Low cost: UPI transactions are free or charge a nominal fee compared to traditional methods such as wire transfers or money transfer operators that charge high commissions and exchange rates.
- Speed: UPI transactions are processed in real time, unlike other methods that can take days or weeks to complete.
- Convenience: UPI transactions can be done from anywhere and anytime using a smartphone and an internet connection, without the need for physical documents or visits to banks or agents.
- Security: UPI transactions are encrypted and authenticated by multiple layers of security, such as biometric verification, PINs, and virtual IDs, reducing the risk of fraud or theft.
- Transparency: UPI transactions provide clear and instant confirmation of the status and amount of the payment, along with the exchange rate and fees applied.
What are the challenges and opportunities for UPI for international payments?
UPI has made significant strides in facilitating international payments, but it also faces some challenges and opportunities for further growth, such as:
- Regulatory compliance: UPI has to comply with the regulations and norms of different countries and jurisdictions, which may vary in terms of KYC (know your customer), AML (anti-money laundering), CFT (combating the financing of terrorism), and data protection requirements.
- Interoperability: UPI has to ensure interoperability with different payment systems and platforms across the world, which may have different technical standards and protocols.
- Awareness and adoption: UPI has to increase awareness and adoption among both domestic and foreign users, who may be unfamiliar with or reluctant to use a new payment method.
- Innovation and competition: UPI has to keep innovating and improving its features and services to meet the evolving needs and expectations of its users, while also facing competition from other payment methods such as cards, wallets, cryptocurrencies, and blockchain.
UPI has emerged as a game-changer for digital payments in India, and it has the potential to do the same for international payments. By leveraging its unique advantages of low cost, speed, convenience, security, and transparency, UPI can chart a path into the global digital payments landscape and create new opportunities for trade, commerce, and remittances.
By
Sujata Muguda
Shreyas WebMedia Solutions