The Unified Payment Interface (UPI) has emerged as a transformative force in India’s financial landscape since its inception in April 2016. According to the most recent NPCI data, UPI transactions in January 2024 amounted to Rs. 18.41 lakh crore, marking a 53% increase in volume and a 42% increase in value on a year-on-year basis. In 2023 alone, UPI facilitated 117.7 billion transactions totalling Rs. 183 trillion, highlighting its significant impact on India’s digital payment systems. According to some estimates, India currently accounts for nearly 40% of global real-time digital payments.
The Unified Payment Interface (UPI) has emerged as a transformative force in India’s financial landscape since its inception in April 2016. According to the most recent NPCI data, UPI transactions in January 2024 amounted to Rs. 18.41 lakh crore, marking a 53% increase in volume and a 42% increase in value on a year-on-year basis. In 2023 alone, UPI facilitated 117.7 billion transactions totalling Rs. 183 trillion, highlighting its significant impact on India’s digital payment systems. According to some estimates, India currently accounts for nearly 40% of global real-time digital payments.
Efforts to internationalise the Unified Payments Interface (UPI) have gained momentum lately, with transactions now facilitated across seven countries (Bhutan, Nepal, Sri Lanka, Mauritius, the UAE, Singapore, and France). With ambitions to achieve two billion transactions per day by 2030, UPI is poised to imprint India’s digital finance infrastructure on regions with which it has strong trade and diaspora ties. The recent authorisation for Indian tourists to use UPI for transactions at the iconic Eiffel Tower signals global recognition for what is arguably India’s finest fintech innovation.
The internationalisation of UPI holds immense potential to strengthen remittance flows to India. Remittances continue to play a crucial role in India’s economy, serving as a stable source of foreign exchange and contributing to incomes and savings. According to the World Bank’s December 2023 Migration and Development Brief 39, India is projected to be the largest recipient of remittances, with inflows expected to increase by 12.4% to $125 billion in 2023, equivalent to 3.4% of India’s GDP. In 2024, inward remittances will likely reach $135 billion.
Despite the high and consistent inflow of remittances over the years, the process of sending and receiving money through traditional channels has remained challenging for India’s diaspora. By leveraging UPI’s growing international reach, the government can significantly enhance the efficiency and convenience of remittance transfers. The real-time, seamless and cost-effective nature of UPI transactions makes it an attractive option for remitters, compared to traditional methods such as bank transfers or money transfer operators. Such channels have often involved high transaction costs, lengthy processing times, complex documentation requirements, and the risk of fraud. UPI’s leaner model has the potential to significantly reduce remittance transaction costs, with estimates suggesting a 25% cut in transfer fees compared to traditional channels. This makes UPI an attractive option for both small-value and frequent remittances.
Moreover, UPI’s accessibility through smartphones, even in remote areas with limited banking infrastructure, will likely democratise access to remittance services. The widespread adoption of UPI internationally can facilitate financial inclusion in two ways. First, by providing easier access to remittance services for unserved and underserved migrant workers and their families, UPI can empower more individuals to participate in the formal financial system. Second, by lowering the barriers to entry for remittance service providers, UPI can significantly expand their market reach, improve operational efficiency, and enhance the overall remittance experience and utility for its customers. Specific policy measures are essential to seize the UPI opportunity for remittances. First, UPI’s integration with other countries’ payment systems can significantly boost remittance flows, as demonstrated by the collaborative efforts with Singapore’s PayNow since February 2023. Using the routes of bilateral agreements, the government should more rapidly expand such partnerships with international stakeholders to establish interoperability and seamless integration of UPI with global payment systems.
Second, ensuring regulatory clarity and interoperability is crucial to instilling trust among migrant users and service providers. The RBI should bring out clear guidelines on cross-border UPI transactions, including regulatory requirements and dispute resolution. This will help streamline the remittance process and mitigate potential risks.
Third, UPI’s international presence can catalyse innovation in financial products and services tailored to the needs of migrant communities. By integrating remittance services with UPI-enabled platforms, financial institutions can offer a diverse range of solutions, including savings accounts, insurance products, and investment opportunities, empowering migrants to build a secure financial future.
Fourth, investing in robust cybersecurity infrastructure and data protection measures is imperative to safeguard the integrity and security of UPI transactions, particularly in the context of cross-border remittances. Implementing stringent cybersecurity standards and regular audits will help mitigate the risk of fraud and unauthorised access. In this regard, RBI must expedite the process of regulatory harmonisation with its international counterparts while launching financial literacy and awareness campaigns to strengthen understanding and adoption of UPI for remittance purposes.
Policymakers, regulators, and stakeholders must join forces to craft a framework that not only guarantees the smooth integration of UPI with global payment systems but also fosters a secure and reliable environment for users. By doing so, India’s fintech innovation can bring about positive changes in remittance processes.
Amarendu Nandy is assistant professor (economics area), Indian Institute of Management (IIM) Ranchi. The views expressed are personal
