UPI Globalisation Explained: the past, present and future of payment platforms in India www.deekpay.com

If there is one innovation in India that has grabbed global headlines, it is undoubtedly theIndia Paymentsflat-roofed buildingUPI(Unified Payment Interface of India) Payment system.

UPI's pride in India's growth story can be easily seen in Prime Minister Narendra Modi's statement at the recently concluded BRICS meeting, "UPI is used at every level, from street vendors to large shopping malls.Today, it is used in all countries of the world, and India is the country with the highest number of digital transactions. "

PM Modi also supported UPI's expansion into the BRICS group, which now has six new member countries. Media reports quoted him as saying, "There is scope for co-operation with BRICS countries on (UPI) technology."

While experts will be watching its expansion into the BRICS group closely, the ambitious Indian payments platform has already begun to move towards global dominance.

Countries are jumping on India's UPI bandwagon

Three countries - France, United Arab Emirates and Sri Lanka - have been quick to jump on the UPI bandwagon in the past few weeks. These three countries will now accept to pass through India's mainlanddigital paymentTransactions carried out by technology.

UPI's entry into France is significant, helping the technology gain a foothold in Europe for the first time. With regard to Sri Lanka and the UAE, the entry of UPI will deepen India's economic ties with these two countries.

Haresh Calcuttawala, co-founder of TreZix, a B2B SaaS platform, said, "Indian travellers will be able to use forex with ease, especially in France.UPI's expanding global footprint will boost bilateral trade and tourism."

Kolkata Walla added that UPI's framework will enable smooth cross-border transactions and ensure fast and secure settlements between global trading partners. "UPI enables businesses to focus on building strong relationships and expanding their global reach."

It is important to explain the reasons for UPI's expansion into these three countries from a business perspective.

France has been one of the preferred European destinations for Indian travellers. Moreover, the country is a major trade destination for Indian SMEs, which are likely to benefit from the launch of India's unified payment interface.

On the other hand, India is Sri Lanka's largest trading partner, with bilateral trade exceeding $5.5 billion. At the same time, India's trade partnership with the UAE is strengthening, especially with the entry into force of the Comprehensive Economic Partnership Agreement last year.

UPI is the pride of fintech in India

UPI's expanding global presence also signals more opportunities for the Indian fintech industry, which attracted $4.8 billion worth of funding in 2022 and is expected to reach $2 trillion by 2030.

This global expansion provides tremendous growth opportunities for the Indian FinTech ecosystem to innovate and build new business use cases that can play a key role in driving its adoption," said Anand Agrawal, co-founder and CTO of fintech startup Credgenics. "

Launched by the National Payments Corporation of India in 2016, UPI has been the torchbearer of the fintech story in India.Starting with just 1 million transactions in October 2016, UPI is now approaching the 1 trillion transaction milestone. This number seems even more significant considering that UPI accounts for 75% of retail transactions by 2022-23.

The biggest change brought about by UPI is the way Indians transact. GlobalData research shows that cash transactions have declined from 90% of total transactions in 2017 to less than 60% by 2021.UPI and other digital transaction systems occupy the remaining space. While cash is still king in India, UPI has effectively created a niche for itself.

"India is a cash economy. But thanks to the widespread adoption of smartphones, government initiatives on bank accounts, and cheap data, the UPI Unified Payments Interface has become an efficient and convenient payment option," said Anushka Rathod, Financial Influencer.

According to a study by the Cebr Centre for Economic Research, unsurprisingly, theUPI paymentsThe fast and efficient nature of the programme resulted in cost savings of $12.6 billion in 2021 and added $16.4 billion to the Indian economy.

How UPI's story is thriving

The 2016 demonetisation campaign changed the digital payments landscape in India. In less than six months after the Rs 500 and Rs 1,000 notes were phased out, total UPI transactions rose from 2.9 million to 72 million. By the end of 2017, UPI transaction volumes grew by 900% over the previous year. It is also worth noting that the introduction of cheap data packs in 2016-17 - India has the third cheapest internet - has certainly helped UPI payments expand beyond India's Tier 1 cities.

But UPI also celebrated another big day when it brought international recognition to digital payment technology. That day was 7 November 2019, the eve of the third anniversary of the abolitionist movement. On that day, tech giant Google sent a letter to the Federal Reserve in support of faster digital payment settlement services.

To prove it, Google tells the success story of UPI in India. The letter attributes UPI's success to its "thoughtful planning", adding that "key aspects" of the design led to its growth in the world's largest country. The letter notes how the development of UPI encouraged Google to enter the payments system through Google Pay, while highlighting the success of the collaboration between government, technology and financial services.

The Future and Challenges of UPI

The future growth prospects of UPI are favourable.UPI accounts for 75% of digital transactions in India and is expected to grow four-fold by 2026. As UPI expands into rural areas, it is likely to account for nearly 90% of total retail digital payments transactions in the next five years in regions and Tier III and IV cities, according to a report by PricewaterhouseCoopers.

UPI's global expansion is also promising. For example, between April and December 2022, Indians spent $10 billion on overseas travel. Considering the huge magnitude of international spending, internationalisation of UPI can contribute significantly to the growth of the Indian economy.

As UPI goes global, thisIndia PaymentsPlatforms may face challenges from Visa, Mastercard and other long-establishedGlobal PaymentsFierce competition from the giants. Visa and MasterCard hold about 80% of the global payments market, and replacing them will be a daunting task.

Rathod said, "These payment platforms and networks have been around for a while and are flush with cash, so they're not going to make it easy for UPI to grow and eat into their market share and profits."

In addition, UPI had to adapt its technology to cater for a wider customer base in the Western world. Initially, transfer and remittance fees will be high due to the low penetration of UPI.

Compliance with various digital regulations and the need for interoperability between various payment systems will be major challenges for UPI.

Agarwal said, "To overcome these challenges, UPI stakeholders can focus on working with global payment system providers and regulators to ensure compliance with local regulations and standards."