💸 Can UPI replace SWIFT and make India a Global Payment Tech Superpower?
The world is set to replace the not-so-swift SWIFT with UPI. Why? How can UPI solve the challenges with SWIFT? Read on.
Sending a text message from one continent to another: blink of an eye.
Flying from India to the US: 15 - 18 hours (on average).
Sending money from India to the US: 1-5 working days!
Yep, money travels across borders slowly. Very slowly.
But hey, this may soon change, thanks to UPI.
Yes, UPI is going global and may soon make India a global payment tech superpower!
How? Read on.
SWIFT: Dominating the Financial World
Back in the 1930s, when the world was fairly manual, the world used ‘Telex’ for international financial communications.
How?
Telex senders would manually describe every transaction in sentences. These transactions were then interpreted and executed by the receiver.
Imagine the human errors, low security, and the slow speed!
To make things easier, enter: SWIFT in the 1970s.
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.
More than 11,000 global SWIFT member institutions sent around 44.8 million messages daily through the network in November 2022!
Basically, anyone and everyone in the financial world - banks, asset managers, exchanges, corporate businesses - use SWIFT to reliably communicate vital financial information.
How exactly does a SWIFT transfer take place?
Well, SWIFT assigns each financial organization a unique code with either eight or 11 characters, known as a bank identifier code or BIC.
And it is through these SWIFT codes that different banks talk to each other and process cross-border communications.
Only problem?
Well, there are two problems with this network.
First, it is incredibly slow, as there are multiple intermediary banks involved in the process. The funds also undergo anti-fraud and anti-laundering checks, that adds to the process time.
Second, SWIFT is as independent as an Indian child living with their parents: only in name.
It is overseen by the G-10 central banks. These countries are Belgium, Canada, France, Germany, Italy, Japan, Netherlands, Sweden, Switzerland, the United Kingdom, and the United States.
Belgium is the lead overseer along with other members like the U.S. Federal Reserve.
Now, while this makes SWIFT a monopoly, this makes the controlling nations even more powerful.
And these nations get to decide who can and cannot use the network.
They can come together and ban someone from using the network.
And they did.
In March 2012, Iran was banned from SWIFT. As a result, Iran lost 30% of its foreign trade and oil export revenues.
Recently, Russia was banned from SWIFT when it started the Russia-Ukraine war.
Now, countries across the globe are realising this.
And they are rushing to the one and only: UPI.
UPI: Alternative to SWIFT?
Since its launch in 2016, UPI has taken the Indian digital payment landscape by storm.
In October 2023 alone, UPI processed over 11 billion transactions, amounting to more than Rs 17.16 lakh crore!
There are 300 million UPI users and 500 million merchants who use UPI to accept payments for their businesses.
India's digital giant is now stepping onto the global stage.
Countries like Singapore, the UAE, Bhutan, UK, Japan and France have shown interest in integrating UPI into their financial ecosystems.
Why, you ask?
Well, for starters, using UPI is easy.
No beneficiary name, account id, SWIFT code, yada yada. All it takes is one UPI ID.
Second, it is cheaper!
UPI is free for consumers and has minimal costs for businesses!
Third, it could help boost economies.
According to a report by ACI Worldwide (2022), UPI low transaction charges have helped us save $12.6 billion!
These savings have increased the purchasing power of citizens, and unlocked $16.4 billion of India's GDP!
What's more?
India's foreign remittances in FY23 stood at $112 billion.
Currently, this money comes through SWIFT, which incurs 3-5% transaction charges.
If more countries start using UPI, we could save on transaction charges, bring more money to India and help us grow!
Plus, a lot of Indians travel abroad.
With the ease of payments, a lot more Indian tourists will be transacting in the destination countries, boosting their economies.
Win-win for everyone, no?
India: Global Payment Tech Superpower?
Countries adopting UPI are not just incorporating a payment system but are participating in a digital revolution.
This shift from SWIFT to UPI represents a shift towards a more inclusive and democratized financial system, where even the smallest transactions are made simpler and more accessible.
What's better is that India is leading the world in this global revolution.
Do you know of any other India-born innovation which has the potential to shake up the world?
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What a load of bull! No UPI is not going to be embraced outside of India. its nothing special. There are far more robust systems in place already also its funny how you use USD for SWIFT and then INR when talking about transactions tgrough UPI. In Reality, EuroZone is coming with its own alternative to SWIFT infact it already exists. UPI on the other hand will also have infrastructral cost in line with SWIFT. It doesn't because its indegenous to India and has minimal to no oversight and regulations. Once moved to other countries it will need to adhere to international and local laws and regulatory practices whch will incur costs and Indian govt cant bankroll it forever. Either way living in the UK and using contactless for years now. I can safely say UPI sucks ass.