Why global is adopting india orgin of UPI payment ?

The Unified Payments Interface (UPI) has emerged as a transformative force in the realm of digital payments, revolutionizing the way people in India conduct transactions. Since its inception in 2016, UPI has experienced unparalleled growth, facilitating billions of transactions each month and reshaping the country’s financial landscape. However, its ambition extends beyond national borders, with India actively pursuing the global adoption of UPI. This ambitious initiative seeks to leverage UPI’s proven success and introduce its innovative payment ecosystem to the international stage. In this comprehensive exploration, we delve into the origins of UPI, its exponential growth within India, the rationale behind its global expansion, the mechanisms driving this initiative, current international acceptance, potential future adopters, benefits, challenges, and the future implications of UPI’s global reach.

Origins and Evolution of UPI

The Unified Payments Interface (UPI) was conceptualized by the National Payments Corporation of India (NPCI) as a means to simplify peer-to-peer and peer-to-merchant transactions. Launched in 2016, UPI aimed to provide a seamless, secure, and instant payment system that leveraged India’s burgeoning mobile and internet penetration. Its foundation rested on the interoperability between banks and financial institutions, allowing users to link their bank accounts to a single mobile application and transact using virtual payment addresses (VPAs) or scannable QR codes. This innovative approach eliminated the need for physical cash or card details, offering a convenient alternative for digital payments.

Exponential Growth of UPI within India

The success of UPI within India has been nothing short of remarkable, characterized by exponential growth in transaction volume and value. Since its inception, UPI has witnessed a staggering increase in both the number of transactions and their total value. For instance, from a mere 92 crore transactions in FY 2017–18, the volume soared to a staggering 8,375 crore transactions in FY 2022–23, reflecting a Compound Annual Growth Rate (CAGR) of 147%. Similarly, the value of transactions experienced a remarkable rise, starting at ₹1 lakh crore in FY 2017–18 and reaching a staggering ₹139 lakh crore in FY 2022–23, representing a CAGR of 168%. Recent data suggests UPI transactions crossed ₹17.4 lakh crore in December 2023 alone.

Rationale for Global Expansion

The unprecedented success of UPI within India has prompted a strategic shift in focus towards global expansion. Several factors drive India’s push for international UPI adoption:

1. Facilitating Inbound Tourism: Acceptance of UPI can enhance the experience for foreign tourists visiting India, enabling them to make cashless payments seamlessly.

2. Supporting the Indian Diaspora: With a significant Indian diaspora residing overseas, UPI provides a familiar and convenient platform for remittances, strengthening ties with the homeland.

3. Boosting Cross-Border Trade: Increased acceptance of UPI can streamline cross-border trade transactions, fostering economic growth and bilateral trade relations.

Mechanisms Driving Global Expansion

The National Payments Corporation of India (NPCI) spearheads the global expansion of UPI through dedicated initiatives:

1. NPCI International Payments Limited (NIPL): This subsidiary focuses on establishing partnerships with international payment service providers (PSPs) and integrating UPI with global payment networks.

2. UPI Hub: Serving as a centralized infrastructure for routing and clearing international UPI transactions, the UPI Hub ensures seamless and secure cross-border payments.

Current Landscape: Countries Accepting UPI Payments

While still in its nascent stage, UPI acceptance has gained traction in several countries beyond India:

1.Singapore: Despite ongoing developments, full-fledged UPI integration is underway following a 2020 FinTech agreement.

2. Bhutan: One of the first countries to adopt UPI outside India in 2021, collaborating with the Royal Monetary Authority of Bhutan (RMA).

3. Nepal: Limited adoption exists, particularly in the tourism sector, with broader integration efforts underway.

4. UAE: Launched in 2022 through collaborations with Mashreq Bank and LuLu Financial Holding, UPI is available for specific transactions in the UAE.

5. France: UPI entered Europe through France in February 2024, with select merchants and landmarks like the Eiffel Tower accepting UPI payments.

6. Mauritius and Sri Lanka: Both countries announced initiatives in 2023 to adopt UPI, aiming to simplify transactions for the Indian diaspora and strengthen economic ties.

Potential Future Adopters

India is actively pursuing partnerships with other countries to expand UPI’s global reach:

1. Malaysia: Ongoing discussions regarding UPI integration are underway between India and Malaysia.

2. Thailand: Thailand has expressed interest in adopting UPI, potentially impacting cross-border tourism and trade.

3. UK: The significant Indian diaspora in the UK presents a lucrative market for UPI adoption.

4. Other Gulf Countries: With strong economic ties, countries like Saudi Arabia and Bahrain could embrace UPI in the future.

Benefits and Challenges of Global UPI Adoption

The global expansion of UPI offers numerous benefits:

1. Convenience for Travelers: Indian tourists and the global Indian diaspora gain a familiar and secure payment option.

2. Boost for Cross-Border Trade: Faster and easier cross-border payments can stimulate trade between India and other countries.

3. Financial Inclusion: UPI promotes financial inclusion by reaching unbanked populations with a user-friendly mobile payment system.

However, challenges such as cybersecurity concerns, technical standards adaptation, and user awareness and adoption need to be addressed.

Future Implications and Conclusion

While it is still early to predict the full extent of UPI’s global reach, its potential is undeniable. By addressing challenges and continuing strategic international expansion, UPI can become a leading player in the global digital payment landscape. Factors contributing to its success include growing popularity, user-friendly interface, government support, and collaboration with international stakeholders.

In conclusion, the journey of UPI’s expansion beyond India’s borders is just beginning. Despite challenges, the potential benefits of a global UPI ecosystem are promising. By promoting financial inclusion, facilitating cross-border transactions, and offering a convenient payment solution for travelers and the diaspora, UPI can serve as a catalyst for positive change in the global payments landscape. As the network continues to grow, its impact on international trade, tourism, and the overall financial landscape will be profound.