India and Singapore are now connected to digital payments: how to make money from India's four-way payments

Last month (21 February), the Monetary Authority of Singapore (MAS) and the Reserve Bank of India (RBI) announced the launch of a payment link between Singapore's PayNow and India's Unified Payments Interface (UPI). This marks the official launch of real-time, small-value cross-border payments between Singapore and India. Users can now initiate transfers directly using their mobile phone numbers, UPI IDs or Virtual Payment Addresses (VPAs) without the need for bank account details, and transactions can be completed within minutes.

Developed by the National Payments Corporation of India (NPCI) under the guidance of the Government of India, UPI is a unified payment system that enables real-time money transfers through a method similar to an email account (VPA). Last year, UPI processed more than 74 billion transactions worth more than Rs 126 trillion (about Rs 10 trillion), demonstrating its widespread popularity. Following the implementation of UPI in India, several Southeast Asian and Latin American countries have started developing their own real-time digital payment and settlement systems. Singapore's PayNow, an interbank e-transfer service launched in 2017 by the Association of Banks in Singapore (ABS) and seven local banks, allows users to make real-time transfers in Singapore dollars using their mobile phone number or ID/PayNow QR code. In the first 11 months of last year, its total transaction volume reached SGD 105 billion (approximately Rs 539 billion). According to the press release, customers of four Indian banks can use PayNow-UPI to receive and pay, while customers of Axis Bank and DBS Bank in India will only be able to receive payments in the initial phase.DBS and Liquid Group, a Singapore-based non-banking financial institution, will progressively roll out the PayNow-UPI service to their customers by the end of March, increasing the number of eligible users and transaction Limit. Currently, the daily transfer limit is SGD 1,000/INR 60,000 per day.

Singapore's Prime Minister Lee Hsien Loong and India's Prime Minister Narendra Modi participated in the launch of PayNow-UPI payments via videoconference. Prime Minister Lee Hsien Loong mentioned that cross-border retail payments and remittances between Singapore and India exceed $1 billion annually. He emphasised the significance of PayNow-UPI as "the world's first payment system using cloud infrastructure and involving financial institutions other than banks" for global regional settlements. The collaboration is a significant milestone for cross-border payments and financial services in both regions, as PayNow-UPI is India's first and Singapore's second real-time cross-border payment system. As a regional financial centre, Singapore has in recent years actively sought payments cooperation with other countries with the aim of establishing its regional payments and settlement system in Southeast Asia. In addition to promoting digital payments domestically, Singapore has already established a real-time cross-border remittance service with the Central Bank of Thailand (BOT) in April 2021 and announced plans to roll out cross-border payments with Malaysia's Bank Negara (BNM) from late 2022 onwards. In August last year, Singapore and Indonesia announced similar plans for future cooperation. Singapore's collaboration with India has been in the pipeline for some time, with MAS and RBI planning to set up a payments link in July 2022. India has also been actively utilising its role in the G20 presidency to collaborate with other countries in developing digital financial infrastructure. In November last year, the central banks of Singapore, Indonesia, Malaysia, Thailand and the Philippines co-signed a 'Regional Payments Linkage' agreement at the G20 Summit, aimed at strengthening cross-border payments cooperation. As we've mentioned before, countries in several regions around the world are trying to establish their own regional settlement systems using technologies such as digital currencies, blockchain and big data. These include the EU's INSTEX (Instrument for Supporting Trade Exchanges), which was established in 2019, and China's Renminbi Cross-Border Payment System (CIPS). The reasons behind this are the inefficiencies, high costs and geopolitical risks associated with using the SWIFT system, as seen in the recent passage of US SWIFT sanctions against Russia and Iran. However, cross-border micro-remittances are an inevitable trend and the complete replacement of traditional cross-border settlement systems will require a long period of experimentation and practice. The co-operation we are currently seeing aims to address the shortcomings of traditional models in terms of efficiency and user experience, fill the gap in the market for small individual cross-border remittances, capture a certain market share, and gradually form a regional settlement system while maintaining co-operation and competition with traditional cross-border settlement systems.

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