Internationalization of UPI: A game changer
India's payment platform UPI was launched in Paris during the Prime Minister's visit to France. This looks like a small beginning, but it is indicative of India's emerging identity in the global payment systems. UPI was launched in 2016 by the National Payments Corporation of India (NPCI), an Indian government agency. It is an instant digital payment system through which money is exchanged between different banks. The great thing is that it is based on the Indian rupee. In this regard, Prime Minister Narendra Modi has said in his statement in France that now Indians can make payments easily, even from the Eiffel Tower of France. A new feature has been added to UPI, called UPI International, for use of UPI by international payers. Due to which payment can be made from Indian Bank accounts to foreign banks, with the help of QR code. UPI payments were already possible in Bhutan, Nepal, Singapore, UAE and Mauritius, and now France has joined the list.
Significantly, in the year 2022, a total of Rs 149.5 lakh crore worth of online transactions took place in the country. In these transactions, transactions worth Rs 126 lakh crore were done only through UPI. A total of about 88 billion online transactions were recorded in the country last year. According to a report by Price Waterhouse Cooper, the number of online payments could reach one billion per day by 2026-27. More importantly, India accounts for more than 40 percent of all online transactions in the world. The great thing is that prior to the recent levy of charges on wallet payments above Rs 2000, online transactions in India have been completely free. Internationalization of UPI is a major priority for NPCI. In 2022, NPCI announced that it would coordinate with banks and payment companies in several countries to enable UPI payments in those markets. Since then UPI has been launched in many countries and preparation is going on in many other countries. Users will be able to make and receive payments in a more convenient and secure manner at locations other than their own. Merchants will be able to reach out to a wider customer base and accept payments from Indian customers. UPI is a convenient as well as a secure payment system. In today's era of cybercrimes it is also a secure payment system that uses two-factor authentication to protect users' accounts. So we see that even with such a large number of transactions, the frauds are minimal. Currently the cost of international payments is very high. Internationalization of UPI will also help in reducing the cost of cross border payments.
It is noteworthy that the campaign to globalize UPI has gained momentum after the sudden disruption of the European system 'SWIFT' in the wake of the Russia-Ukraine war last year. The US had abruptly blocked Russia from receiving payments through SWIFT, the largest global payment network. There was a time when Western countries ruled the financial world, they controlled not only international finance, but also payment systems. SWIFT had a monopoly in global payments. Every now and then the western countries used to threaten the world that if any country does not follow what they say, they will ban that country from receiving payments through SWIFT. Their restrictions usually mean blocking international payments via SWIFT. Now that in the wake of the sanctions imposed on Russia by the European Union following the Russia-Ukraine war, with India's efforts to promote settlement of international trade in Indian rupees, several other regional blocs are also promoting trade in their members' respective home currencies, it’s now giving fitting reply to hegemony of the West in payment systems. This is also giving impetus to the process of de-dollarization in the world. In less than a year, after the Reserve Bank allowed the rupee in international payments, 19 countries have opened Vostro accounts by their banks to accept rupee payments. In this whole scenario, India's effort to promote RuPay and UPI for international settlement and facilitate settlement of trades in Rupee by allowing foreign banks to open Vostro accounts in Indian banks, could prove to be a game changer in international payment systems. With the proven success of UPI domestically and its growing acceptance internationally, India could become a global leader in international payment systems.