Cross-border transactions on UPI, India's Unified Payments Interface: connecting India to the world www.deekpay.com

In recent years.Indiaconstitutedigital paymentThe country with the highest number of transactions. Last year, India saw more digital payment transactions than the US, China and Europe combined. This is thanks to theNational Payments Corporation of IndiaLaunched about seven years ago on 11 April 2016Unified Payment Interface of India--UPI. Every month.UPI TradingThe numbers are all higher than last month. According to NPCI 's data, in May 2023, the total number of monthly UPI transactions reached a record 9.4 billion, with a record value of INR 14.89 trillion (~US$181 billion).

India's emergence as a global leader in digital payments is attributed to its strong technological infrastructure and timely regulatory intervention. Millions of people have adopted UPI as their primary mode of payment as it enables instant mobile-to-mobile payments almost free of cost. Every UPI transaction requires the use of dual authentication, password or PIN to access any UPI application to confirm the transaction. As a result, UPI has become a highly secure payment mechanism that has earned the trust of its users.

In recent years, India has taken various initiatives to extend the reach of UPI beyond its borders and make it a truly global payment system. The rest of the article focuses on India's and countries' cross-border and international UPI paymentsSome positive measures in terms of facilities.

India's initiative

The NPCI is a programme of theReserve Bank of India (RBI), a not-for-profit umbrella organisation set up to operate retail payment and settlement systems in India. Since 2020, NPCI has taken several steps to make UPI available globally for international peer-to-peer and merchant payments.

Recommended Reading:National Payments Corporation of India NPCI

UPI Global

The National Payments Corporation of India (NPCI) requires all stakeholders (i.e., member banks, third-party application providers, and other payment providers) to make UPI Global available by 31 December 2021.While the timeline has been extended to 30 September 2022 to accommodate other members that have not yet implemented the functionality at the issuer and UPI application level,5 the National Payments Corporation of India (NPCI) has not yet approved a further extension.PhonePe is the first Indian fintech company to support cross-border UPI payments. PhonePe users can make payments to merchants through their Indian bank accounts at merchant outlets or points of sale in the UAE, Singapore, Mauritius, Nepal and Bhutan.Paytm It was also announced that support for UPI Global payments will be rolled out.

Recommended Reading:Indian payment wallet Patm

UPI for Non-Resident Indians

As per the circular issued by NPCI on 10th January 2023, Non-Resident Accounts (e.g. Non-Resident External (NRE) Accounts and Non-Resident Regular (NRO) Accounts) with international mobile numbers will be allowed to enroll and transact using UPI. To begin with, mobile numbers from the following ten countries are allowed - USA, UK, Singapore, Canada, Australia, Oman, Qatar, UAE, Saudi Arabia and Hong Kong. Compliance with foreign exchange laws and RBI guidelines is the responsibility of the member bank and anti-money laundering compliance is the responsibility of the remitter and the recipient bank.

UPI for foreign travellers in India

Reserve Bank of India onPrepaid payment instruments The Principal Instruction (PPI MD) on PPI was amended in February 2023 to provide for the issue of PPI to foreign nationals and non-resident Indians (NRIs) visiting India (collectively referred to as 'travellers'). Providing for the issuance of PPI to foreign nationals and Non-Resident Indians (NRIs) visiting India (collectively referred to as 'travellers'), the PPI MD states that travellers can be issued full KYC PPI denominated in Indian rupees, starting with travellers from G20 countries to India. The UPI facility is available to travellers entering India through the PPI issued to them. To begin with, this facility has been made available to inbound travellers from G20 countries for making merchant payments at select international airports (New Delhi, Mumbai and Bengaluru airports). Currently, ICICI Bank, IDFC First Bank and two non-banking issuers, Pine Labs Private Limited and Transcorp International Limited, issue UPI-linked wallets. In February 2023, EbixCash became the first entity to offer UPI services to travellers in the pilot phase.

Recommended Reading:India Prepaid Payment Instruments PPI

Traveller PPIs are issued in the form of an e-wallet linked to UPI, after physical verification of the traveller's passport and visa. Traveller PPI can only be recharged/recharged upon receipt of cash or foreign currency in any other payment instrument and Traveller PPI can only be used for merchant payments. The outstanding amount of Traveller PPI cannot exceed INR 200,000 at any time.

Bilateral initiatives

Several digital economies such as the UK, Singapore and the UAE have partnered with NPCI India through NPCI International Payments Limited ("NIPL"), a wholly owned subsidiary of NPCI India. The partnership aims to provide seamlessCross-border paymentsThis enables Indians to use UPI for real-time peer-to-peer and merchant transactions in Singapore and real-time peer-to-merchant transactions in the UK and UAE.

Singaporean

Singapore has been actively promoting its payments roadmap, which covers initiatives such as universal QR codes for accepting payments, unified point of sale and PayNow.

The Reserve Bank of India and the Monetary Authority of Singapore announced in September 2021 that they will be linking their fast payment systems, UPI and PayNow, respectively. Chia Ling Koh, Managing Director of Osborne Clarke Singapore, said: "UPI-PayNow is currently being offered by DBS and the Liquid Group, a non-banking UPI-PayNow is currently offered by DBS Bank and Liquid Group, a non-bank payment organisation. The Monetary Authority of Singapore (MAS) has been in the process of issuing non-bank payment institution licences under the relatively new Payment Services Act. There is no doubt that the payment services market in Singapore is becoming increasingly competitive."

The UPI-PayNow connection should enable fund transfers between users in India and Singapore. The transfer of funds from India to Singapore can be done using a mobile number and from Singapore to India using UPI.Virtual Payment Address. Additionally, Indian users visiting or residing in Singapore can make payments to Singapore merchants using their bank's UPI app.

Recommended Reading:UPI Virtual Payment Address VPA

peer-to-peer trading

UPI-PayNow link to be operational by February 2023 Account holders of participating banks and financial institutions in Singapore and India will be able to conduct cross-border remittance transactions through UPI and PayNow. As per RBI's FAQs on the UPI-PayNow link, six Indian banks can currently receive remittances through the link and four Indian banks can currently send remittances. The FAQ lists the apps and platforms offered by the said banks, provided the user'sUPI ID It can be used by registering with a bank. There are two participating entities in Singapore that receive and send remittances.

The daily transaction limit is INR 60,000 (approx. SGD 1,000) and is currently permitted only for peer-to-peer remittances for maintenance of relatives abroad and gifts. The Reserve Bank of India's Liberty Remittance Scheme (LRS) has a limit of $250,000 per person per financial year.P2M transactions are not yet enabled through a link. The link allows real-time transactions, similar to domestic UPI transactions.

Users should be able to start using this feature when participating banks roll out the update in their respective UPI apps. As of June 2023, we were unable to find payment and collection functionality on some of the listed apps.

P2P (point-to-market) transactions

For point-to-merchant transactions, UPI provides a full range of services through the BHIM Accepted by select merchants in Singapore, BHIM is a mobile payment application developed by NPCI based on the underlying UPI infrastructure.BHIM is associated with PayNow and Indian users in Singapore can make payments using BHIM UPI by scanning the QR code at select merchants in Singapore. Indians can make cross-border merchant payments through PayNow using the UPI functionality on the following banking apps: City Union Bank, UCO Bank, Bank of Baroda and Punjab & Sindh Bank. at the time of payment, the BHIM app automatically converts the amount from SGD to INR and displays it for Indian payer's reference. The transaction rate for using UPI (via NETS QR code) at merchants is 1.8% of the transaction value.

Recommended Reading:Indian Currency Interface BHIM

UAE

NIPL has partnered with a number of organisations in the UAE, such as NeoPay, a subsidiary of Mashreq Bank, the Arab Monetary Fund through Buna (a cross-border payment system), and Network International, an organisation that supports digital commerce in the MENA region.These collaborations are intended to assist in the implementation of UPI-interoperablePayment Solutionsand help Indians make seamless payments to merchants in the UAE.NeoPay has started accepting payments through BHIM UPI at NeoPay enabled shops and merchant outlets. In addition, PhonePe has enabled UPI transactions at merchant shops and point of sale in the UAE. This will help Indians in the UAE to make point to merchant payments.

Recommended Reading:Indian payment wallet PhonePe

United Kingdom of Great Britain and Northern Ireland

The UK has set up the Fast Payment System (FPS), involving private payment startups, to enable real-time payments up to £1 million online or through phone banking.25 NIPL has signed a Memorandum of Understanding (MoU) with PayXpert to enable the acceptance of UPI in the UK. The partnership aims to enable Indian bank account holders to make in-store payments using UPI through PayXpert's point-of-sale devices in the UK, including through UPI-based QR codes. The partnership is expected to provide Indian travellers with a familiar and convenient way to pay in the UK.

Bhutan, Nepal ...... and the rest of the world

In a similar endeavour, NPCI was an early partner with Bhutan, which was the first country to deploy QR codes using the UPI standard and the first to accept mobile payments through BHIM.

In addition, in furtherance of India's Neighbourhood First policy, Nepal adopted UPI for digital transactions in February 2022.NIPL has joined hands with Gateway Payments Service and Manam Infotech to provide peer-to-peer and merchant payment services in Nepal.PhonePe has now enabled peer-to-peer and merchant payments through UPI in Nepal and Bhutan. PhonePe is currently implementing peer-to-peer and merchant payments through UPI in Nepal and Bhutan.

NIPL is also eyeing partnerships with global private fintech companies. It has joined hands with TerraPay, a global payments infrastructure company, to sign an MoU to allow Indian residents with UPI IDs to receive real-time international payments through TerraPay. NIPL signed a similar MoU with PPRO to offer RuPay card and UPI acceptance services among PPRO's global customers such as Payment Service Providers (PSPs) and global merchant acquirers.

NPCI is currently working on cross-border transactions with several other countries. It aims to work with at least 30 countries, including Australia and France. The extremely low cost and secure mechanisms for conducting UPI-based digital transactions may also benefit many developing countries, as they aspire to build digital financial infrastructures to create a globally integrated digital economy.

Legal considerations

data storage

The Reserve Bank of India's circular on "Storage of Payment System Data" dated 6 April 2018 (the "DL Circular") recognises the security measures required for digital payments. The Circular states that all payment system providers and banks must store data related to the payment systems they operate only within India. Complete end-to-end transaction details should be part of the stored data. For the foreign portion of the transaction, the data can be stored abroad.

In addition, the processing of payment transactions can take place outside India.

in which case the data may be stored outside India during that time, but only in India after processing.

If the processing is done outside India, the data shall be deleted from the foreign system and brought back to India not later than 1 working day or 24 hours, whichever is earlier, after the payment has been processed.

If subsequent activities (e.g. settlement processing after payment processing) are carried out outside India, they should be carried out in real time and data should only be stored in India during this process, and

If there is any other related processing activity (e.g. refunds, etc.), the data can be accessed at any time from India where it is stored.

Although the DL Circular does not specifically mention UPI in its scope, the DL Circular should apply to cross-border UPI transactions. This is because NPCI is an RBI authorised Retail Payments Organisation and the DL Circular should be applicable to NPCI as well as bank members that are part of NPCI and process UPI transactions. In May 2020, the National Payments Corporation of India (NPCI) has implemented the Foreign Exchange Management Circular (FEMC) for all Digital Payment Platform (DPP) members requiring them to submit system audit reports to demonstrate compliance with the FEMC.

exchange control

In India, all transactions involving foreign currencies are governed by the Foreign Exchange Management Act, 1999 ("FEMA").FEMA"FEMA treats "capital account transactions" separately from "current account transactions". Under Section 2(i) of FEMA, current account transactions include "amounts payable in connection with foreign trade, other current operations, services, and short-term banking and credit facilities in the ordinary course of business" and "remittances of funds for the maintenance of parents, spouses, and children living abroad". "UPI transactions are typically used for the purchase of goods, services or peer-to-peer payments, rather than for the purchase of assets such as real estate. Therefore, peer-to-peer and merchant UPI Global transactions may be current account transactions.

Recommended Reading:Indian Foreign Exchange Management Act FEMA

UPI Global transactions will be subject to the LRS limit of USD 250,000 per financial year for resident individuals and shall not be exempted from this limit unless expressly exempted by the amendments to the Foreign Exchange Management (Current Account Transactions) Rules, 2000 ("Current Account Rules"). For example, the previous Rule 7 of the Current Account Rules provided that cardholders were not required to obtain prior approval from the Reserve Bank of India for international credit card transactions made outside India and excluded such transactions from the LRS limit. In May 2023, this rule was cancelled through an amendment.

Though the NPCI circular does not place any restriction on the use of UPI Global, as of now, cross-border UPI transactions can be used for peer-to-peer remittances, for gifting and for supporting relatives abroad. If UPI cross-border transactions are classified as current account transactions, future UPI Global transactions should be permitted under the current account rules unless:

Prohibited transactions such as remittance of lottery winnings, earnings from horse racing/riding or any other hobby, remittance of lottery tickets, sweepstakes, banned/prohibited magazines, football betting, etc., remittance of payment of export commissions for equity investment in joint ventures/wholly owned subsidiaries of Indian companies abroad, remittance of dividends from any company to which the requirement of balancing of dividends is applicable, etc.

Transactions require prior approval from the Government of India, such as remittance tourism for cultural exchanges, or where the total amount of remittances made by an individual in a financial year exceeds the limits set by the LRS.

concluding remarks

The promotion and acceptance of UPI in several countries suggests that cross-border transactions using UPI will only grow. This is further fuelled by the acceptance of the RuPay card in Singapore and the UAE, as well as theIndian Bill Payment System (BBPS) will soon be able to accept cross-border inbound payments. The Reserve Bank of India's Annual Report 2022 also makes recommendations on cross-border UPI, such as geo-tagging existing payment touch points and expanding literacy programmes.

Recommended Reading:Indian Bill Payment System BBPS

The benefits of enabling cross-border UPI payments include:

For countries/regions where peer-to-peer payments are enabled (e.g. Singapore), it is easy to send money from and to India. Payment facilities for residents of India visiting other countries (e.g. tourists and short-term visitors). Transaction facilitation for Indian students studying abroad. Easily shop from merchants outside India without making international payments through debit/credit cards in countries/regions where the co-operation extends beyond point-of-sale machines.

While agreements have been reached with multiple states and foreign entities, actual effective implementation and widespread use of UPI may take some time and may require overcoming some teething problems.UPI changes theIndia PaymentsThe way to transact. In just a few years, India's cash economy is rapidly transforming into a digital transaction economy. This society-changing innovation has global benefits. Partnerships with established international payment service providers indicate a positive push to make UPI accessible to potential users globally. in addition, UPI's reach is helping India drive the internationalisation of the rupee. This is an important step in India's globalisation efforts and could make India a truly global digital economy.

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