UPI’s global ambition: The payments system needs to address many issues before it goes international

NPCI International Payments Ltd (NIPL), a wholly-owned subsidiary of the National Payments Corporation of India (NPCI), has left no stone unturned in its quest to make the Unified Payments Interface (UPI) a global solution.

These efforts appear to be bearing fruit. During Prime Minister Narendra Modi’s recent visit to France, he announced that the European country had allowed the use of UPI for retail payments. France joins Singapore, the UAE, Nepal, Sri Lanka and Bahrain in allowing UPI. Pretty soon, Indians visiting France, Thailand, the UK and the US could have a potentially cheaper payment option.

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“Customers pay between 1.2 and 4.2 per cent markup for using a credit-, debit- or prepaid forex card abroad. We have already seen cash being replaced by UPI in domestic payments. A similar trend might soon be seen overseas. The other area it can disrupt is cross-border remittance, where the cost of sending $500 today to India is almost 5 per cent, which can potentially come down with UPI interoperability,” says Ranadurjay Talukdar, Partner and Payments Sector Leader at EY LLP India.

For this to happen, though, the NPCI must address a few challenges.

Technology integration: The NIPL will need to improve traceability and accountability to ensure customer data security. “One key thing is how the UPI will connect globally with other faster payment systems, because the technology, messaging protocols, and standards are different. So, a connector will have to be built at NPCI to ensure technology integration,” says Mihir Gandhi, Partner and Payments Transformation Leader at PwC India.

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Competitive conversion rates: The promise of UPI is that transaction fees could be lower than, say, credit cards that have different charges like cross-currency mark-up, forex, etc. Talukdar says, “Unless the exchange rate and the mark-up fees are competitive, it will not be easy to make affluent and super-affluent customers shift to UPI from cards.” Providing rewards for UPI transactions will also be essential.

QR set-up: The other challenge is that card penetration is very high in most countries that Indians visit—like the US, UK, UAE, Singapore and Thailand. So, setting up a QR-based network will be a daunting task. “Merchant acceptance of QR will also need some legwork in these countries,

as the domestic real-time payment networks compete with cards in these markets,” says Talukdar.

Gandhi adds, “It will probably take a year or two to smoothen the global payments process. And implementation will take time because all the banks have to accept the tech integration. They must ensure that QR codes are accepted at all merchant locations.”

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Lobbying and geopolitics: In developed economies, where cards are the primary mode of payment, UPI adoption might take a while as it may face opposition from incumbents. Satyajeet Kunjeer, Founder and CEO of investment app Deciml, says, “Companies like MasterCard, Visa and banks alike will not welcome this move as it directly impacts their revenue. Also, in countries like the US, where lobbying is legal, we could see banks and payment gateways create serious barriers to entry.”

But Gandhi points out that memoranda of understanding (MoUs) have been signed with some countries. “I think NPCI has to [ensure] universality and, in short, that all the banks of [the foreign] country accept UPI payments and vice versa in India. There has to be reciprocity (an interchange) between UPI transactions and that country’s faster payment transactions in India. So, there has to be reciprocity of acceptance,” says Gandhi.

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