Powered by a robust digital infrastructure, public participation in the digital and financial spaces, an increase in digital literacy among the public, and penetration of digital services in the remote regions of the country, Digital India has become a global benchmark for nations to follow. It has also acted as a catalyst for the evolution of technology-led innovations across the country, with India’s digital infrastructure innovations now being emulated globally. Wider adoption of telemedicine through the eSanjeevani application[i], successful vaccination drive through the one-stop Co-WIN portal, DigiLocker, and Goods and Services Tax Sahay are a few success stories among many. The National Payments Corporation of India International (NPCIL)-led Unified Payments Interface (UPI) is another such innovation that is transforming the payments landscape beyond its national boundaries by globalising India’s best-in-class digital payments infrastructure. This viewpoint examines how the digital payment interface has grown in India and its expanding digital network and outreach through digital diplomacy.
UPI FinTech innovation grows by leaps and bounds
The use of technology to make financial systems accessible and more efficient has helped India lead the world in real-time digital payments, with 48.6 billion such transactions emerging from the country in 2021, accounting for more than 40% of the global transactions.[ii] India also has the highest FinTech adoption rate of 87% among the public as compared to the global average of 64%.[iii] The UPI, an instant payments system indigenously developed by the National Payments Corporation of India (NPCI) and regulated by the Reserve Bank of India (RBI), has a crucial role to play in this regard. This popular mobile payments service allows instant credit transfers from one account to another by knitting multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, providing seamless fund routing, and integrating merchant payments under one hood. Its ability to cater to ‘peer-to-peer (P2P)’ and ‘person-to-merchant (P2M)’ inter-banking digital transactions and accessibility via all major platforms such as Android and iOS have acted as a positive disruption towards enabling greater digital payments adoption in the country. India is further enhancing financial inclusion with the promotion of economical and user-friendly digital payment solutions such as UPI lite for low-value transactions and UPI 123 PAY for feature phone users.[iv]
Various policy measures and schemes initiated by the government were instrumental in bringing about a transformational change in the digital landscape over a short period of time. On the one hand, policies and schemes such as the National Digital Literacy Mission (NDLM) and Digital Saksharta Abhiyan (DISHA) improved digital literacy; the Aadhaar Enabled Payment System, FASTag, Rupay, and IMPS simplified payments; and on the other, projects such as Project BharatNet and DIGIDHAN Mission significantly promoted internet penetration which helped in building strong use cases for merchant payments promoted a shift to digital transactions. The digital infrastructure and its acceptability among the public have seen a meteoric rise over a decade as the number of adults having bank accounts increased from 17% to more than 80%, whereas previously 4% had a unique ID document, now over a billion people have a digital ID document, tele density reached up to 93% and as of 2022, over 6 billion of digital payment transactions are completed per month.[v]
Further, the integration of government policies and programs, such as the JAM Trinity (Jan Dhan Yojana, Aadhar, and Mobile), with the digital payments interface has been instrumental in bringing about greater financial inclusion, increasing accessibility to welfare services, and aiding in the transparent and timely delivery of financial benefits to the public, especially in remote areas. According to the Economic Survey 2022–2023, since its creation in 2016, the number of banks that became a part of the real-time payments system increased from 35 in December 2017 to more than 380 in December 2022. Further, out of the total 88.4 billion financial digital transactions in FY22, UPI accounted for 52%, as compared to 17% of the country's total 31 billion digital transactions in FY19, and recently, for the month of December 2022, UPI touched its highest-ever mark with 7.82 billion transactions worth ₹12.8 trillion.
The testing times of the pandemic further accelerated its acceptance, application, and coverage, with the UPI serving as a critical lifeline for small and micro merchants as the UPI processed 29.22 billion contactless merchant transactions with a total value of over ₹21.7 trillion in FY23 (till December 2022).[vi] According to official data, BHIM UPI emerged as the preferred mode of payment for citizens and recorded 8.03 billion digital payment transactions with a value of ₹12.98 trillion in January 2023.[vii] This fascinating journey and the success of UPI made it popular not only at home but also abroad.
Propagation of India’s digital payments interface
As a part of developmental cooperation and expanding outreach, India is transforming the payments landscape by promoting the acceptance of RuPay/UPI-powered apps, cross-border remittances, and UPI-like deployment in international markets through NPCIL, the international arm of NPCI. Inspired by the exemplary innovations by NPCI in the country, several nations have displayed an inclination towards establishing a ‘real-time payments system’ or ‘domestic card scheme’. Even the International Monetary Fund (IMF) Managing Director Kristalina Georgieva, while highlighting why India continues to be a bright spot in the global growth story, emphasised that the UPI is ‘an excellent example of technology boosting financial inclusion’.[viii]
Further, India’s development partnership with regard to the globalisation of the UPI payments system, the promotion of cross-border remittances via real-time payments systems, and encouraging the FinTech ecosystem is not limited to a few countries. In our immediate neighbourhood, NPCIL is building a modern digital infrastructure for Nepal that will enable the creation of a real-time payments system and aid digital transactions within the country. Also, NPCIL and Euronet have bid to jointly build Myanmar’s proposed real-time retail payments system as well as a QR code generation and repository system.[ix] In Bhutan, the launch of the BHIM app, an Indian mobile payments app based on the UPI, and full interoperability of the flagship digital project, RuPay has strengthened development partnership and further deepened financial linkages between India and Bhutan.[x]
India and the ASEAN nations are strategically engaging through collaborative discussion at the Joint Working Groups (JWG) level for strengthening their partnership by enabling digital payment connections and linking the FinTech ecosystem.[xi] One such JWG with Singapore led to the recent linking of India’s UPI and Singapore’s PayNow, under an agreement between the RBI and the Monetary Authority of Singapore. Further, announcements of linking UPI with Dubai’s NeoPay and the UK’s PayXPert reflect the propagation of India’s digital payments interface and its interoperability with already existing digital payment solutions.[xii] Recently, Japan has also expressed interest in studying the platform and eventually linking it.[xiii] Other countries that have adopted different forms of Indian payments systems include France, the UAE, Saudi Arabia, Bahrain, Maldives, and Oman. India is also focussing on Middle-East countries and the USA, from where it receives a significant amount of remittances, as well as African nations like Namibia.[xiv] Further, India has signed 13 MOUs with countries that want to adopt UPI for digital payments. [xv] There is growing interest globally in India’s digital public infrastructure in general and UPI in particular.
As a step forward, RBI has provided UPI access to non-resident Indians (NRIs) who have international mobile numbers linked to their NRE/NRO accounts from 10 countries, with certain restrictions. [xvi] Additionally, it has expanded the facility to access UPI for their merchant payments (P2M) for travellers from the G-20 countries as a pilot at selected international airports initially, prior to permitting all inbound travellers to India while they are in the country.[xvii] This aligns not only with the G20’s financial inclusion priority of enabling faster, cheaper, and more transparent cross-border payments, but also contributes towards fulfilling the United Nations Sustainable Development Goals (SDG 10),[xviii] which emphasises reducing the cost of remittances.
Towards Universal Digital Inclusiveness
The adoption of India’s indigenously developed digital payments interface by a number of nations and the fostering of cross-border interoperability of payments creates large growth potential for the FinTech ecosystem. By bridging the traditional barriers to development, UPI can assist in facilitating the expansion of global e-commerce, faster and more cost-effective transfer of cross-border remittances, supporting micro, small, and medium enterprises (MSME) of the respective countries, and further boosting trade and travel. Thus, while reflecting on the journey of UPI and its growing adoption abroad, it is pertinent to note that it has expanded the scope of digital diplomacy from being a mere tool for communication to building a robust digital payment ecosystem for the promotion of financial inclusivity worldwide and urge the participating nations to mutually address the challenges pertaining to the governance and security of global inflows and outflows.
*Avni Sablok, Research Associate, Indian Council of World Affairs, New Delhi.
Disclaimer: Views expressed are personal.
[i] Press Information Bureau, “National telemedicine service of India - eSanjeevani achieves 8 crore teleconsultations”, Ministry of Health and Family Welfare, Government of India, December 6, 2022. Available at: https://pib.gov.in/PressReleasePage.aspx?PRID=1881185. (Accessed on 03.03.2023)
[ii] ACI Worldwide Real-Time Payments, “Prime Time for Real-Time”, April 2022. Available at: https://www.aciworldwide.com/wp-content/uploads/2022/04/Prime-Time-for-Real-Time-Report-2022.pdf. (Accessed on 16.03.2023)
[iii] Derryl D’Silva, Zuzana Filková, Frank Packer and Siddharth Tiwari, “The design of digital financial infrastructure: lessons from India”, Monetary and Economic Department, Bank of International Settlement, December 2019. Available at: https://www.bis.org/publ/bppdf/bispap106.pdf. (Accessed on 03.03.2023)
[iv] Press Information Bureau, “More than 200% growth in digital payment volume in last four years since FY 2018-19”, February 13, 2023. Available at: https://pib.gov.in/PressReleasePage.aspx?PRID=1898882. (Accessed on 13.03.2023)
[v] Physical and Digital Infrastructure: Lifting Potential Growth, “The Economic Survey 2022-2023”, January 31, 2023. Available at: https://www.indiabudget.gov.in/economicsurvey/doc/eschapter/echap12.pdf. (Accessed on 14.03.2023)
[vi] Physical and Digital Infrastructure: Lifting Potential Growth, “The Economic Survey 2022-2023”, January 31, 2023. Available at: https://www.indiabudget.gov.in/economicsurvey/doc/eschapter/echap12.pdf. (Accessed on 27.02.2023)
[vii] Press Information Bureau, “Digital Transactions in India”, Minister of State for Electronics and Information Technology, Government of India, February 8, 2023. Available at: https://pib.gov.in/PressReleasePage.aspx?PRID=1897272#:~:text=BHIM%20UPI%20has%20emerged%20as,lakh%20crore%20in%20January%202023. (Accessed on 27.02.2023)
[viii] “India remains a ‘bright spot’, to contribute 15% of global growth in 2023: IMF MD”, The Hindu, February 23, 2023. Available at: https://www.thehindu.com/business/Economy/india-remains-a-bright-spot-to-contribute-15-of-global-growth-in-2023-imf-md/article66540985.ece. (Accessed on 27.02.2023)
[ix] Harshit Rakheja, “After Foray Into Singapore, NPCI Plans To Take UPI To Myanmar”, October 29, 2020. Available at: https://inc42.com/buzz/after-foray-into-singapore-npci-plans-to-take-upi-to-myanmar/. (Accessed on 07.03.2023)
[x] Ministry of External Affairs, Government of India, “India-Bhutan Relation”, September 2021. Available at: https://mea.gov.in/Portal/ForeignRelation/Bhutan-2021.pdf. (Accessed on 27.02.2023)
[xi] Indian Council of World Affairs, Sapru House, “Media Release on the ICWA-AIC International Conference to Commemorate Thirty Years of India-ASEAN Relations on ‘Geopolitical Shifts and Opportunities: New Horizons in India-Southeast Asia Relations’, 20-21 July 2022”, July 2022. Available at: /show_content.php?lang=1&level=2&ls_id=7703&lid=5137. (Accessed on 07.03.2023)
[xii] Ministry of External Affairs, Government of India, “Annual Report 2022”, February 23, 2023. Available at: https://mea.gov.in/Uploads/PublicationDocs/36286_MEA_Annual_Report_2022_English_web.pdf. (Accessed on 27.02.2023)
[xiii] Mint, “Japan may implement UPI model, inter-linkage: Digital minister Kono”, March 13, 2023. Available at: https://www.livemint.com/news/world/japan-may-implement-upi-model-inter-linkage-digital-minister-kono-11678642468563.html (Accessed on 14.03.2023)
[xiv] Ministry of Finance, Government of India, “Annual Report 2021-2022”, April 8, 2022. Available at: https://dea.gov.in/sites/default/files/Annual%20Report%20%28English%29.pdf. (Accessed on 27.02.2023)
[xv] Money Control, “India has signed MoUs with 13 countries to integrate with UPI: Ashwini Vaishnaw” February 13, 2023. Available at: https://www.moneycontrol.com/news/business/india-has-signed-mous-with-13-countries-to-integrate-with-upi-ashwini-vaishnaw-10068531.html. (Accessed on 13.03.2023)
[xvi] “NRIs from 10 countries can use UPI with their international mobile numbers”, The Hindu, January 12, 2023. Available at: https://www.thehindu.com/business/Economy/nris-from-10-countries-can-use-upi-with-their-international-mobile-numbers/article66368563.ece. (Accessed on 27.02.2023)
[xvii] “Statement on Developmental and Regulatory Policies”, Reserve Bank of India, February 8, 2023. Available at: https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=55179. (Accessed on 27.02.2023)
[xviii] “International Day of Family Remittances 16 June”, United Nations. Available at: https://www.un.org/en/observances/remittances-day/background#:~:text=SDG%2010.,higher%20than%205%20per%20cent. (Accessed on 27.02.2023)