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Picture this–you find yourself immersed in the vibrant atmosphere of Singapore’s most famous Bugis Street market, savoring your favourite noodle bowl and indulging in a delectable serving of sticky mango rice. However, as you reach for your wallet, a sudden realisation strikes–you’re short on cash to settle the bill. Anxiety sets in, only to be interrupted by the abrupt sound of your alarm, pulling you back to reality.

Thankfully, it was just a far-fetched nightmare. Because the next time you’re in Singapore, you can relish the good food and enjoy the sightseeing without any cash-based hassles. All thanks to UPI (Unified Payments Interface), India’s proprietary digital payment system that has revolutionised the payments landscape in the country.

UPI’s success story in India and abroad

Developed by the National Payments Corporation of India (NPCI), an RBI regulated entity, UPI initially started as a payment facilitator in India, and is now poised to make its mark on the global stage.

In the last decade, India has witnessed a remarkable digital transformation, overcoming traditional transactional hurdles and driving the growth of UPI in digital transactions. UPI has not only revolutionised India’s payment sector, but is also gaining traction among non-resident Indians in various countries, propelling growth into the sphere of cross-border transactions. According to NPCI data, from just one million transactions in October 2016, UPI crossed the 10 billion mark in August 2023.

Moreover, the Indian government is also actively encouraging UPI adoption in cross-border transactions. This has led to successful UPI integration in countries such as France, Bhutan, Oman, UAE, and several Southeast Asian nations. The NPCI International has strategically positioned UPI on the global stage by establishing partnerships with key players worldwide, including Discover Financial Services USA, Japan Credit Bureau, Union Pay International China, Royal Monetary Authority of Bhutan, and Network for Electronic Transfers in Singapore.

For foreign nationals and Non-Resident Indians (NRIs) arriving from G20 countries, the UPI One World initiative offers the convenience of Made in India – UPI and allows them to harness the power of digital payments effortlessly. UPI One World, a specialised Prepaid Payment Instrument linked to UPI, caters to inbound travellers, enabling them to conduct transactions within the country.

An observation by the Reserve Bank of India (RBI) projected that UPI is expected to account for majority of retail digital transactions within the next five years, which underlines its dominance in the Indian payment ecosystem. While UPI International allows users to pay international businesses through QR code scanning, outbound remittances from India are not yet available for consumers.

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Opportunities and challenges

Cross border UPI transactions present opportunities that are beyond mere convenience. This payment method facilitates seamless remittances to and from India. In countries where peer-to-peer payments are enabled, such as Singapore, individuals can effortlessly send money back home or receive funds from their families and friends.

For Indian residents travelling or residing in foreign countries, cross-border UPI payments offer a hassle-free way to conduct transactions. This global adoption of UPI holds immense significance for Indian small and medium enterprises foraying into international trade and partnerships. Traditional international transactions often come with high fees, including currency conversion charges and international transaction fees. UPI transactions, particularly in collaboration with foreign countries, can offer more transparent and competitive rates.

Despite the promising outlook, there are several challenges that must be navigated for the successful implementation of cross-border UPI transactions. Navigating the complex web of international regulations and compliance requirements poses a significant challenge, given the varying data protection and financial laws across different countries. Expanding UPI globally demands robust security measures to protect financial data and prevent fraud. Coordinating these measures on a global scale while maintaining efficiency is a significant challenge. Managing real-time currency conversion and exchange rates is crucial for cross-border transactions. Payment wallets need to provide transparent and competitive rates, adding complexity to the task.

Final words

The transformative impact of UPI in India has set the stage for its global expansion. The promotion and acceptance of UPI by some countries demonstrates that cross-border transactions using UPI are poised to increase. As UPI continues to break down barriers, it marks a significant step toward India’s globalisation efforts, positioning the nation as a true global digital economy.

(Ravi Battula is the Vice President of merchant acquiring business, Wibmo, a PayU company)