India’s real-time payments system on quest to leave global footprint

[NEW DELHI] INDIA’S real-time payments system, Unified Payments Interface (UPI), has made great strides since it was launched in 2016, to the point where transactions on the platform are now worth 55 per cent of the country’s gross domestic product (GDP).

According to latest government data, UPI transactions worth 71.7 billion rupees (S$1.17 billion) were recorded by the National Payments Corporation of India (NPCI) since the start of FY2023 in April. India’s real GDP at constant prices was pegged at about 121 billion rupees in FY2022.

Over the last five years, UPI transactions in terms of value saw a compounded annual growth rate of 160 per cent. A recent report by payments platform PayNearby found that UPI transactions registered a 650 per cent and 500 per cent increase in value and volume across rural- and semi-urban retail counters of PayNearby, suggesting its wider adoption beyond Tier One and Tier Two regions in India.

With the simplicity of making peer-to-peer and peer-to-merchant payments via a QR code or phone number driving UPI’s exponential growth, NPCI – the agency tasked with facilitating India’s digital payments infrastructure – has been busy taking UPI global.

This March, Nepal became the first country to adopt the UPI payment system. NIPL, an international subsidiary of NPCI, partnered with Mashreq, a leading financial institution in the United Arab Emirates, to offer UPI there.

The system has also made initial inroads in other countries such as Bhutan, France, the United Kingdom and Oman.

Last year, NIPL signed an agreement with Singapore-based cross-border digital payment service provider Liquid Group to introduce UPI-based QR code payment systems in Singapore, Malaysia, Thailand, the Philippines, Vietnam, Cambodia, Hong Kong, Taiwan, South Korea and Japan.

NIPL also has a deal with PPRO Financial, a London-based global payments provider, to expand UPI through PPRO’s merchant network.

Plans are already underway to link UPI with Singapore’s PayNow to enable fund transfers between users in Singapore and India at the lowest possible cost. A report from The Economic Times noted that cross-border transaction fees could be reduced by as much as half.

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The original plan was to launch this linkage in July this year, but this did not happen, and a new launch date has not yet been announced. When contacted by The Business Times, NPCI declined to give an update on the status of the project.

In a speech at the Singapore Fintech Festival in November, Monetary Authority of Singapore managing director Ravi Menon said cross-border payments should “flow seamlessly like water”.

“Singapore has been working with other countries with its payment system PayNow for faster payments,” he said. 

“We connected PayNow to PromptPay of Thailand last year. It’s the first such linkage in the world. And we are finalising our linkage with India’s UPI and Malaysia’s DuitNow.”

In October this year, NIPL partnered with the UK-based payment services firm Worldline, with UPI being offered to European merchants to let them accept e-payments from Indian tourists.

Marc-Henri Desportes, the deputy chief executive officer of Worldline, said the company would focus on its largest markets first and gradually roll the service out across Europe.

“The goal is to work with NIPL and maximise the footprint in line with market demands,” he added.

The Netherlands, Belgium, Luxembourg and Switzerland are among the first few markets to offer the UPI service. Once it is active, the linkage with RuPay – a global card payment network from India – will begin, said Desportes.

Over time, the hope is that greater adoption of real-time payments – both within India itself, and with merchants and users around the world – will bring down the costs for all stakeholders.

According to figures from the World Bank, sending remittances worldwide costs users an average of 6.3 per cent of the total amount sent.