🧐 UPI Going Global: What's in it for India?
India wants to take UPI across the globe. But how will we benefit from this?
Imagine if someone told the US that, "Hey, you should be more like India."
Wouldn't it be a super proud moment for us?
Well, we don't have to wait around for this moment. It already came in 2019 when Google told the US central bank that they should develop a payments system like UPI.
Yes, UPI has been probably India's best invention since we created zero (okay, that might be an exaggeration). And now the whole world wants in.
And India is obliging, helping other countries set up UPI payments systems. But what's in it for us?
🌍 Why the World Wants UPI?
Thanks to UPI, for the first time in years, India is ahead of the world. Much much ahead.
Unlike other countries we don't have to wait around days or hours for payments, or cash cheques to get our money.
We get it instantly.
Just look how far behind other countries are in terms of real time payments:
No wonder the whole world wants to get on our level.
So, a lot of payment companies and banks are tying up with India to take UPI to their home countries. The most recent one being Worldline, which is taking UPI to Europe.
Thanks to these partnerships Indians will be able to make UPI payments in other countries as well.
And though it will take a lot of time, a lot of tech, and a lot of regulatory compliance, maybe just maybe, these countries could soon accept UPI for their domestic payments as well.
This will obviously help foreign economies a lot. You see, the ease of payments means a lot more Indian tourists will be transacting in their countries and probably end up buying more stuff. And if they go domestic everyone wins.
UPI's low transaction charges have helped us save $12.6 billion! These savings increase the purchasing power of citizens, and boost economic growth. So, a lot of countries could flourish thanks to UPI.
But wait, what does India gain from all of this?
🤔 Why is India Taking UPI Global?
India has multiple reasons to promote UPI globally.
You see, we Indians are everywhere, on every continent.
And these Indians send a lot of money back home from these continents.
So, India received the highest amount of remittances ~$87 billion in 2021.
Now, this money either comes through bank transfers or through institutions like Western Union.
And the transaction charges on these remittances are super high, approximately 5%-9.3%. In fact, Indians lost Rs. 219 billion in 2020 to these transaction charges.
UPI, which doesn't have transaction charges, could solve this problem. This will bring more money into India and help us grow.
What's more, this will also give us freedom from SWIFT. Huh?
Society for Worldwide Interbank Financial Telecommunications (SWIFT) is an independent financial system that helps banks across the world communicate and transfer funds. From remittance transfers to import dues, everything passes through the SWIFT system.
Which is why it is super important.
But SWIFT is as independent as an Indian child living with their parents: only in name. It is mostly controlled by Western nations. And these nations can come together to ban anybody from using the system.
That's what happened with Russia when it started the Russia-Ukraine war. The Western nations imposed a host of sanctions on it, and banning its banks from SWIFT was one of them.
Thanks to this Russia couldn't receive a lot of its payments and it lost 10%-15% of its GDP.
India does not want to be in this position. Which is why it is exporting UPI to a lot of countries to ensure remittances from them do not ever stop.
And the move could be great for banks and UPI-supporting apps as well.
You see, UPI is free, so these banks and apps can't earn money from it even though it takes money to provide UPI facility.
Now, an international payment would also not bring them transaction charges, but they would get some money as a currency conversion charge and GST, which could help them earn revenue.
Apps like Google Pay and Paytm could then also tap into foreign markets and use this UPI data to provide other financial products like loans and insurance.
So, it’s a win-win for us from all sides.
The only problem? Compliance.
And this could be the only barrier stopping other countries from adopting UPI.
So, the National Payments Corporation of India needs to ensure that our current partnerships run smoothly. This could encourage other countries to also come on board.
What other benefits do you think we can get from UPI going global? Do you think it could eventually facilitate rupee trade with countries?
⚡ In a line: The world wants UPI because of how fast it is and how much money it helps save and this can also really help India as it would reduce depend on foreign countries for remittances.
💡Quick question: Do you think UPI can replace SWIFT?
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