Why globalisation of India’s state backed UPI will further pick up steam

Globalisation of India’s Unified Payments Interface (UPI), which first went beyond the borders in 2021, has steadily progressed. In 2021, Bhutan became the first country to adopt UPI. In just two years, UPI has spread its wings to more than a dozen countries including Canada, Singapore, Malaysia, UAE, Bahrain and Nepal among others. France is the latest to officially join the bandwagon.

“India and France have agreed to use UPI in France. In the coming days, it will begin from the Eiffel Tower, which means Indian tourists will now be able to pay in rupees,” Prime Minister Narendra Modi who is currently visiting France, said.

Talks with the French authorities have been on for sometime. Last year, the NPCI International Payments Ltd (NIPL) signed a memorandum of understanding with France’s Lyra Network to facilitate UPI transactions.

Many more countries are expected to adopt the state backed payments mode in the near future giving competition to the Chinese Cross-Border Interbank Payment System (CIPS), which is accepted payment form in countries with projects under the Belt and Road Initiative.

The adoption of UPI in other countries has helped in lowering the cost of money transfers. Payment transfer including remittances have now become easier, seamless and quick.

Earlier, Modi said that UPI along with RuPay is not just low cost with highly secure technologies, they have become India’s identity in the world. He said that India was “happy to share” the experience with other countries. Several other countries including many categorised as developed economies are also looking at establishing their own digital transaction mode much on the line of UPI.

The push to make UPI global has picked up steam after the sudden disruption in SWIFT in the wake of the Russia-Ukraine war last year. The US abruptly halted SWIFT, the largest global payments network, in dealing with Russia.

However, the move has only showcased the need for countries to develop an alternative payment system. “Payments system can be weaponised today and we cannot depend on other countries’ mercy. We have to be self reliant when it comes to payments,” Swadeshi Jagran Manch (SJM)’s national co-convenor Ashwani Mahajan told India Narrative.

Rest of World, a news and analysis with a focus on technology in a report said, “In the aftermath of U.S. payment sanctions stunting Russia, more countries have vocalized a desire for internet and payments sovereignty.” The report added that India has pitched its digital public infrastructure (DPI) as a sovereign, self-owned technology stack.

UPI transactions are only set to rise with the rapid increase in penetration of mobile phones. The rollout of 5G technology is set to further boost access to Internet driving digital transactions in a country which has been traditionally driven by cash.

The International Monetary Fund noted that with a burgeoning cashless society, the old ways are increasingly forgotten by the country’s hundreds of millions of young people. “With the memory of cash reliance already rapidly fading since the beginning of the smartphone era, the pandemic helped further accelerate the embrace of contactless digital transactions, especially for small amounts, as people tried to protect themselves from the virus,” it said, adding that the Reserve Bank of India too has been prompt in promoting digital payments.

The Economic Survey this year pointed out that in 2021-22, payments through the UPI accounted for more than 50 per cent of total 8,840 digital transactions.The Survey also highlighted that between 2019 and 2022, UPI transactions rose 121 per cent in terms of value and 115 per cent in terms of volume.

UPI, launched in 2016, is now the most accepted form of transaction in India, beating the use of plastic money.

Also read: After Singapore, UPI payment link likely with UAE & Mauritius too