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UPI to be expanded in 20 countries by RBI

ICICIdirect 7 Mins 20 Jun 2024

India's Unified Payments Interface (UPI) is set to embark on a global journey. Today, UPI systems have a presence in France, Sri Lanka, Singapore, the UAE, Bhutan, Nepal, and Mauritius, among others. The Reserve Bank of India (RBI) now has ambitious plans to expand UPI's reach to over 20 countries by the financial year 2028-29.

The move signifies India's growing influence in the global fintech space and its potential to redefine cross-border payments. Why RBI has this plan, and how the expansion of UPI will benefit Indians? We try to answer these questions in this article.

RBI's Plan for UPI Expansion

Most of you use UPI. Before discussing the expansion plan, we want to give you some technical details. UPI is a real-time, interbank mobile payment system that facilitates instant money transfers between bank accounts using a single mobile application. It eliminates the need for complex bank account details and relies on a Virtual Payment Address (VPA) for user identification. With this background, let us look at RBI's plan.

The RBI and NPCI International Payments (NIPL) have plans to expand the UPI to 20 countries by FY29. As per the report, this initiative has been taken to increase UPI and RuPay's global reach. The central bank with NPCI International Payments Ltd. (NIPL) will work towards taking UPI to 20 countries with an initiation timeline of 2024-25 and a completion timeline of 2028-29.

RBI's objective behind the expansion

The above expansion plan is in line with the goals for Viksit Bharat 2047. Let us look at other reasons why RBI wants to expand UPI to more countries:

  • Growing Demand for Seamless Cross-Border Payments: With globalization and the rise of the digital nomad lifestyle, the need for convenient and cost-effective cross-border payments is increasing. UPI's expansion aims to address this demand by offering a faster and cheaper alternative to traditional methods like wire transfers.
  • Boosting International Trade: UPI's global reach can facilitate smoother international trade between India and other countries. Faster and more efficient payment settlements can encourage increased trade volumes and economic cooperation.
  • Strengthening the RuPay Network: UPI's expansion is likely to be coupled with the promotion of RuPay cards, India's indigenous debit and credit card network. It can reduce reliance on foreign card networks and promote financial sovereignty.
  • Enhancing Remittances: A significant Indian diaspora resides abroad. UPI's global reach can simplify and expedite remittance flows back to India, benefiting families and the Indian economy.

Current international payment methods

At present, when you go to a foreign country, there are different payment options you have and most of them have challenges or drawbacks:

Debit/Credit Cards

It is a widely used option for online international payments. Major card networks like Visa and Mastercard are generally accepted. You must know that when you use your credit or debit card in a foreign country:

  • Foreign Transaction Fees: Banks often charge foreign transaction fees (typically 2-4%) on international transactions.
  • The markup on Currency Conversion: Banks may apply a markup on the currency conversion rate, resulting in a slightly less favorable exchange rate for you.

International Money Transfer Services

Several online money transfer services allow you to send and receive money internationally. These services often come with:

  • Competitive Exchange Rates: These services generally have more competitive rates compared to banks.
  • Lower Transfer Fees: Transfer fees can vary depending on the service, amount, and destination country but can be lower than bank fees.

Benefits to Indians after this expansion

After UPI has a presence in more countries in the coming years, it will surely benefit Indians. Below are some benefits:

Potential for Wider Acceptance: Currently, UPI payments are accepted through QR codes for merchant (e-commerce) payments in France and Nepal. As UPI gains traction internationally, Indians traveling or working abroad could benefit from using UPI for everyday transactions in those countries. It eliminates the need to carry cash or rely solely on foreign debit/credit cards that might incur fees, as discussed above.

Improved Financial Inclusion: For the Indian diaspora settled abroad, UPI can make receiving money from India faster and easier. It can be particularly beneficial for those (majorly students) who rely on financial support from families back home.

Faster, Cheaper Remittances: Sending money abroad to family or friends becomes quicker and cheaper. UPI's real-time nature could significantly reduce processing times compared to traditional methods like wire transfers. Additionally, lower transaction fees compared to banks or money transfer services can lead to cost savings.

Before you go

The RBI's initiative to take UPI global signifies a bold step towards transforming the landscape of international payments. The next few years will be crucial in observing how effectively India collaborates with other nations and navigates the technical and regulatory hurdles. If successful, UPI's global reach can not only benefit India but also empower individuals and businesses worldwide with a faster, more convenient way to send and receive money across borders.

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