India’s United Payments Interface (UPI) real-time payments system has transformed how Indians make payments, allowing them to easily transfer money instantly from one bank account to another: from a customer to a business, or between individuals. Since its 2016 launch, UPI has amassed 300 million users and 500 million merchants in a population of 1.4 billion and has been a decisive factor in India’s embrace of cashless payments given its ease of use and interoperability.
Having become a major payments rail in India, UPI now aims to build up its cross-border capabilities. However, questions remain about whether what works for digital payments in India can work globally.
The top selling point for UPI in cross-border payments is that it could both accelerate and reduce the cost of cross-border transactions to and from India, the world’s top remittances market. According to the World Bank, India’s remittances were roughly US$100 billion in 2022, the most of any nation in the world and significantly ahead of No. 2 China and No. 3 Mexico.
For UPI to tap into this market, India must work out agreements with the countries from which Indian diaspora send the most money home. The United Arab Emirates is No. 2 on this list after the United States, and New Delhi and Abu Dhabi discussed allowing cross-border remittances via UPI in a November 2022 meeting.
Though India has signed a deal with the UAE’s Mashreq Bank that enables Indian travellers to the country to pay for their purchases on UPI, that is small potatoes compared to the remittances market. The UAE accounts for up to 18% of India’s inward remittances, which means US$18 billion.
Singapore is also a key remittances market for India though smaller than the UAE. In February, UPI hit another important milestone: India linked UPI with the city-state’s PayNow real-time payment system, a move that could ultimately disrupt the more than US$1 billion in annual cross-border flows between the two nations.
One way to measure the success of UPI’s cross-border efforts expansion efforts will be by the scope of its network. The most straightforward element of this expansion will be gaining support for UPI international payments so that Indians overseas can pay for goods and services with the platform. To that end, UPI is already present in the UAE, Singapore, Mauritius, Nepal, Bhutan, France and the United Kingdom.
Looking ahead, it will be important for UPI to enter the United States, Thailand, Indonesia, Malaysia, Switzerland and Australia – all countries favoured by Indian travellers.
In April, Indian neobanking platform Venlo launched a UPI-powered app to provide a faster cross-border payment experience for users. It is a UPI-backed wallet that allows users to have multi-currency bank accounts and spend locally through UPI in India.
Another key measure of UPI’s success overseas will be merchant adoption levels. One way to accelerate merchant adoption would be to partner with local payments processors or aggregators that can help extend support for the Indian payment rail in their respective countries.
An important case study for UPI’s global expansion is Nepal as it could show the feasibility of replicating the platform’s success in India from the ground up in a foreign market. Indeed, UPI will function for Nepali users like it does for Indians in India.
If UPI is successful in Nepal, that could pave the way for additional expansion in the region. To that end, Bhutan and Bangladesh have close ties with India and are steadily embracing digital financial services. While the population of Bhutan is small at 777,000, Bangladesh represents a significant market opportunity with its population of 169 million.