UPI targets a bigger global presence
India’s United Payments Interface (UPI) payments rail has achieved massive success in its domestic market that will be difficult for any future competitor to surpass. According to a new report by PwC, total UPI transaction volume is expected to grow form 131 billion in the 2023-24 fiscal year to 439 billion by 2028–29. UPI now accounts for over 80% of India’s overall retail digital payments in India and is expected to surpass 90% by 2028-29. Given UPI’s success, India has sought to expand its footprint internationally and in the past few years it has become available in a number of countries from the United Arab Emirates and Bhutan to the UK and France. Yet questions remain about whether UPI can serve as a foundational platform for digital payments outside of India.
At present, UPI’s international presence is steadily growing but remains limited in terms of scale. That could change if the payments rail were able to extend to the United States, the world’s largest economy and a top source of remittances to India. In February, India’s Economic Times reported that UPI’s operator, the National Payments Corporation of India (NPCI), was in discussions with Indian and U.S. banks to establish a real-time payment link between the two countries. However, it is unclear to what degree these discussions have progressed.
At the recent Global Fintech Fest in Mumbai on August 28, Christopher Waller, a member of the U.S. Federal Reserve Board of Governors, did not endorse interlinking instant payment systems across different countries to expedite cross-border transactions. “Variation around the world in domestic fast payment network adoption means that the value of globally interlinked systems is not yet clear,” Waller said at the event. “I am not entirely convinced that interlinking arrangements will necessarily deliver on those goals.” He added that “no silver bullet” can boost speed and efficiency without tradeoffs. “Unless new solutions are found, interlinking fast payment systems might increase the risk-management burden for banks that participate in them,” he added.
India may yet find an opportunity to cooperate with the U.S. on cross-border payments, but UPI may be able to gain greater traction in developing economies that need to build up digital payments infrastructure. This is the case in Nepal, which geographically and culturally is a good fit for UPI. On March 8, the NPCI – which has inked an agreement with Nepal’s largest payment network Foneway Payment Service – said that UPI is live in the mountainous South Asian country. Users of the platform can now scan QR codes to make payments to Nepalese merchants. In its first phase, the partnership will enable Indian consumers to make instant, secure, and convenient UPI payments across various business stores in Nepal by using UPI-enabled apps.
