UPI’s global game may start with Indians abroad

India's Unified Payments Interface (UPI), the world's largest real-time payment system, is poised to expand globally through the country's overseas diaspora. UPI, developed by the National Payments Corporation of India (NPCI), aims to become a preferred method for cross-border transactions within the next decade. Dilip Asbe, CEO of NPCI, stated that the network envisions itself being self-sufficient in cross-border payments, similar to its domestic dominance.

NPCI is currently engaging in discussions with countries like Japan, Malaysia, and Bahrain to integrate UPI with their payment systems. These governments and central banks will ultimately make the final decisions due to geopolitical and regulatory factors. Additionally, NPCI is exploring the potential use of agentic AI, such as OpenAI's ChatGPT and Alphabet Inc.'s Gemini, to enhance the UPI experience.

UPI's success in India has been attributed to its ability to facilitate instant money transfers between bank accounts via mobile phones, eliminating the need for card networks in many transactions. As NPCI seeks to replicate this success overseas, it will initially focus on nations with large Indian communities that contribute significantly to global remittance flows.

India's diaspora, numbering over 35 million, sent home an estimated $155 billion in remittances in the fiscal year ending March 2021, making it the largest inflow globally. These overseas Indians have also played a crucial role in bolstering the country's foreign exchange reserves during periods of market volatility through special deposit schemes.

The expansion of UPI into foreign markets aligns with the ongoing shift in the business model of UPI domestically. The recent approval of legislation in India allows banks and other payment providers to charge fees on UPI transactions. However, NPCI has not yet decided on implementing any such charges. The expansion plan builds upon UPI's current presence in nine countries, including Singapore, France, and the United Arab Emirates.

Currently, UPI enables person-to-person remittances in Singapore and Nepal, while inward remittances are facilitated from Greece.

The initiative by NPCI to extend UPI's reach comes at a time when countries are prioritizing greater control over their payment systems following Western sanctions that have isolated Russia from the SWIFT financial messaging system and frozen much of its foreign exchange reserves. NPCI's CEO emphasized that no government would want to rely excessively on a critical function like payment systems, highlighting the potential dangers of payment systems being weaponized.