Making Global Financial Transactions Seamless: India’s Key Steps

As a part of its financial transformation and inclusion efforts, the Indian government has been adopting a variety of new practices. Along with these efforts in place, the last few months have seen a pronounced focus on making global financial transactions smooth and seamless. The idea is to make cross border payments faster, cheaper and even enable those outside the country to use India’s UPI. In this context, there are two major developments or announcements that deserve recognition, the integration of India’s UPI with Singapore’s PayNow for cross-border payments and remittances and the commencement of UPI for NRIs.

India’s UPI integrates with Singapore’s PayNow

UPI in India has been a key driver of domestic payments in the country. Expanding its scope to facilitate cross border payments, India kickstarted its first cross-border, real-time payment linkage with Singapore. Recently, the RBI (Reserve Bank of India) and MAS (Monetary Authority of Singapore), the central banks of both the countries, announced the much awaited launch of linkage of India’s UPI with Singapore’s PayNow. This move comes associated with the fact that payments and remittances from Singapore contribute to ~5.7% of the total foreign inward remittances to India, which is expected to cross the $100 billion mark in 2023.

With the increasing volume and nature of cross border transactions between India and Singapore, this payments linkage is likely to set in motion a wide ranging impact. Currently, the transaction charges range between $4-$6 depending on the mode and can take anywhere from up to 24 hours to a few days. This linkage seeks to address the time and cost gaps associated with transactions between citizens from the two countries. Some of the key implications of this linkage are:

  • Ease of payments through mobile phones in real-time at much lower costs of transfer
  • Give a further boost to cross-border retail payments between the two countries, which is currently at $1 billion
  • Promote greater trade and financial inclusion for both the countries with faster, cost effective and transparent payment mechanisms

A total of 8 banks from both the countries are participating in this linkage currently, which will accelerate and grow with time. As of now, Indians can remit up to ~62,000 INR (SDG 1000) via this gateway, per day. What is even more noteworthy about this linkage is that this marks the world’s first such linkage supported by cloud-based infrastructure and participation of non-banking financial institutions.

While this linkage is truly a transformative step for the financial future of the two countries together, there are certain concerns that need to be addressed in due course of time. For instance, data protection in cross-border payments is still a question that requires deliberation and implementation. At the same time, a joint governance model to facilitate the scalability and resilience of this linkage is currently not in place.

Invariably, like any new launch or partnership, some operational and implementation factors will need more attention in the months to come. Nevertheless, the scope of financial transformation for both countries and the propensity for greater trade and impact are unparalleled. Focus on a joint governance council or board with participation from both the nations, across regulators, industrial bodies and other core stakeholders will help expand the scope by ensuring technological, commercial and operational viability and scalability. Once the seeding issues are addressed, the economic potential of this partnership will be immense. India is also considering extending this cross payment linkages with other countries as well including UAE, Mauritius, etc.

UPI for NRIs

The second development that is noteworthy is the launch of UPI for NRIs. Until recently, any person who wanted to access UPI needed an Indian mobile number. However, this launch has enabled NRIs from 10 countries to use international mobile numbers for UPI. Essentially, UPI sends an SMS to the user’s number to confirm that the same is linked to the bank account. This required NRIs to maintain an Indian number overseas, with the cost of recharging it and the other efforts associated.

To access UPI with an international number, the NRI must:

  • Have NRO or NRE accounts linked with the international number they wish to use for UPI
  • Have their NRO or NRE account in a bank which is KYC compliant

Compliance, regulations and other aspects of money laundering, etc. will have to be monitored and regulated by the remitter/ beneficiary bank. Some of the key benefits of UPI for NRIs include:

  • Easy transfer or payments by NRIs to Indian UPI users
  • Elimination of the need/ cost to maintain an Indian number to access UPI
  • Convenience during travel to India, without spending a lot on international credit cards
  • Augment the use of Indian UPI in foreign countries, facilitating more global adoption

One of the major implications from this development is likely to be felt during the G20 summit with India’s presidency. International travelers and delegations can use UPI during their stay in the country, facilitating seamless transactions. As India’s UPI goes global with this move, it will significantly improve adoption especially for small businesses and families living across borders.

Overall, these two major developments are being heralded as facilitating financial transformation and inclusion for India and greater integration with global economies. This will definitely increase the pace, scope and volume of digital payments and is likely to provide a boost to the Indian economy. While there might be some initial operational hiccups in the beginning, however, once over the hump, these developments will certainly mark a new era in financial innovation for the country.

Vinod Singh
Managing Director

Disclaimer: The views expressed in this feature article are of the author. This is not meant to be an advisory to purchase or invest in products, services or solutions of a particular type or, those promoted and sold by a particular company, their legal subsidiary in India or their channel partners. No warranty or any other liability is either expressed or implied.
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