Thursday 28 / November / 2024
New Delhi: India is making remarkable progress in its efforts to extend the reach of its digital payment systems such as RuPay and UPI (Unified Payments Interface) on a global scale. Among the recent developments, Europe has joined the list of regions that are embracing India's payment systems.
The Unified Payments Interface (UPI) serves as a digital platform that consolidates numerous bank accounts into a single mobile application. Utilising this application, you can conveniently initiate real-time money transfers and immediate payments using your smartphone. The only prerequisites are the recipient's mobile number or their virtual payment address, synonymous with the UPI ID.
Various countries, including France, UAE, Saudi Arabia, Bahrain, Singapore, Maldives, Bhutan, and Oman, have welcomed diverse forms of Indian payment systems. As a result, Indian citizens will now have the liberty to utilize UPI and similar platforms for making payments within these nations.
Speaking during the G20 digital economy working group meeting in Lucknow on February 13, 2023, Union Minister Ashwini Vaishnaw revealed that India has signed memoranda of understanding (MoUs) with 13 countries that intend to adopt the UPI framework for digital payments and that Singapore has already completed its integration with the UPI system.
These global partnerships have materialised as NIPL (NPCI International Payments Limited) establishes collaborations with various nations to establish an extensive acceptance network for RuPay and UPI. This initiative aims to enable Indian travellers to utilise these payment channels when visiting other countries. NIPL, established in April 2020 as a fully owned subsidiary of the National Payments Corporation of India (NPCI), is dedicated to extending the usage of RuPay and UPI beyond India's borders.
Earlier, in 2008-09, the National Payments Corporation of India (NPCI) was established, and on April 11, 2016, it introduced the UPI system in India. The primary objective behind the Unified Payments Interface was to advance the Indian economy's transformation into a digital ecosystem. Dr. Raghuram G. Rajan, then the RBI governor, undertook the initial rollout of the UPI system, which included the participation of 21 member banks. Starting from August 25, 2016, these banks commenced the availability of their UPI-enabled applications on the app store.
Furthermore, in alignment with its aspirations to enhance the digital economy, India has introduced UPI accessibility for Non-Resident Indians (NRIs) in 10 foreign countries. This applies to Indian bank accounts linked to foreign mobile numbers, and it also encompasses foreign travellers arriving in India, at select international airports.
On February 8, 2023, the Reserve Bank of India announced its intention to allow foreign travellers destined for India to utilise the UPI (Unified Payments Interface) for making retail payments, specifically for transactions between individuals and merchants (P2M transactions). This provision will initially be accessible to travellers from G20 nations who are arriving at specific international airports.
The G20 is a collection of 19 countries – Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, United Kingdom – along with the European Union. Additionally, the central bank clarified that this service will eventually extend to all other entry points in the country, with further instructions on the operational aspects set to be released shortly.
India and Russia are currently engaged in in-depth talks aimed at creating systems that would simplify cross-border transactions. These discussions encompass various aspects, such as the potential approval of RuPay cards from India and Mir cards from Russia, enabling the use of Indian rupees and the Rouble for transactions within their respective markets. Additionally, there is an examination of the compatibility between India's UPI system and Russia's Faster Payments System (FPS) operated by the Bank of Russia. Notably, Russian authorities have also brought up the possibility of India adopting the Russian financial messaging system known as the Services Bureau of Financial Messaging System of the Bank of Russia, a move designed to enhance the efficiency of international payments.
At the 13th Session of the India-Thailand Joint Trade Committee (JTC), the continuous endeavours were assessed concerning advancements achieved in connecting India's UPI and Thailand's Prompt Pay Service. Thailand holds a significant role as a trading ally in Southeast Asia, contributing to 16 percent of India's overall trade within the region. Additionally, Thailand stands out as a primary choice for Indian travellers heading abroad. In the preceding year, Thailand welcomed in excess of 11 million international visitors, with nearly a million originating from India. This positions India as the second most influential source of tourism for Thailand in 2022, following Malaysia.
Starting from February 21, individuals residing in Singapore and India have the convenience of promptly transferring funds to one another utilizing their respective financial platforms, UPI and PayNow. The synchronisation of these cross-border real-time payment systems was inaugurated at 11 am on Monday, February 20. The ceremony was presided over by Reserve Bank of India (RBI) Governor Shaktikanta Das and Ravi Menon, Managing Director of the Monetary Authority of Singapore (MAS). The virtual presence of both Indian Prime Minister Narendra Modi and Singapore Prime Minister Lee Hsien Loong added significance to the launch event. Notably, Indian residents are now empowered to engage in transactions with counterparts in Singapore via mobile payment applications that are tied to a mobile phone number and utilize the UPI interface, as exemplified by Google Pay.
NIPL and European payment services facilitator Worldline have entered into agreements to enhance the adoption of Indian payment channels throughout Europe. Through this partnership, Worldline's QR code-based mechanism will enable merchants' Point-of-Sale (PoS) systems across Europe to receive UPI payments from Indian consumers utilizing their mobile devices.
In addition to facilitating convenient travel for Indians and providing a smooth payment infrastructure, this measure will also enhance the advantages for European merchants by attracting more Indian tourists, leading to greater footfall and expenditure. NIPL announced in their press release that they aim to focus on markets like BENELUX (Belgium, the Netherlands, and Luxembourg) and Switzerland. They plan to extend their reach by introducing Worldline QR in additional European countries as well.
Starting from its launch in 2016, UPI's popularity has been consistently on the rise in India. A recent report titled 'India Digital Payments Report,' published by Worldline, indicates that in the second quarter of the fiscal year 2022, India recorded 20.57 billion online transactions, totalling INR 36.08 trillion. These transactions encompass debit and credit cards, mobile wallets, prepaid cards, and UPI, which cover both person-to-merchant (P2M) and person-to-person (P2P) transactions.
According to data from the Reserve Bank of India (RBI), UPI transactions in FY 2022-23 amounted to INR 139.2 trillion, constituting about 73 percent of all non-cash transactions in India during 2022. A projection by PricewaterhouseCoopers (PwC) suggests that by FY 2026-27, daily UPI transactions could reach 1 billion, comprising roughly 90 percent of all non-cash transactions.
As of April 2023, UPI transactions reached a volume of INR 8.9 billion, with a total value of INR 14.07 trillion. This reflects a 59 percent increase in UPI transactions compared to April 2022 and a 49 percent growth in transaction value year-on-year. Additionally, data from the National Payments Corporation of India (NPCI) reveals that approximately 74 billion UPI transactions, worth INR 125.94 trillion, were conducted in the calendar year 2022.
These figures denote an almost 90 percent surge in transactions and a 76 percent rise in the average transaction value compared to the preceding year. Notably, December 2022 marked a significant milestone with a record-breaking 7.82 billion UPI transactions, amounting to INR 12.82 trillion.
The digital payments sector in India is flourishing, driving the country's transition from a cash-focused economy to one powered by digital innovations. With one of the world's largest payment ecosystems and a thriving digital economy, India is on track to achieve a $5 trillion economy by 2025. This growth is supported by an anticipated 1.5 billion daily digital payment transactions.
Although cash transactions remain prevalent, the digital payments landscape is experiencing remarkable year-over-year expansion. A range of electronic payment methods, including Unified Payments Interface (UPI), Immediate Payment Service (IMPS), National Electronic Toll Collection (NETC), Bharat Bill Payment System (BBPS), and Aadhaar-enabled Payment System (AePS), are reinforcing India's payment infrastructure. UPI, a real-time payment system, reached an all-time high of 2.8 billion transactions in June 2021, as reported by the National Payments Corporation of India (NPCI), driving the rapid advancement of India's digital economy.
The Government's strong emphasis on digitalization, aligned with the ambitious Digital India initiative aiming for a "Faceless, Paperless, Cashless" economy, along with the rise in smartphone adoption, expanding internet users, the emergence of fintech companies, and technological advancements, are driving India's revolution in digital payments. Consequently, this transformation is greatly advantageous to citizens as it provides them with convenient, secure, and dependable access to a variety of digital payment alternatives, ultimately elevating their overall quality of life.
In addition to favourable regulatory norms, advancements in technology are also playing a pivotal role in encouraging banks and merchant aggregators to enhance the acceptance of digital payments among merchants. This, in turn, offers customers convenient and secure options for digital transactions.
As a prominent participant within India's financial landscape, Hitachi Payment Services Pvt. Ltd., a subsidiary of the Hitachi Group, is utilizing its cutting-edge digital payment solutions to promote the adoption of digital transactions in both urban areas and rural regions of India.
To bolster the country's digital payment framework, Hitachi is delivering a comprehensive array of dependable and secure digital payment solutions. These encompass various merchant point-of-sale (POS) solutions, integrated POS systems, and value-added services.
Through Hitachi's efforts, merchants are empowered to receive payments using multiple methods, including Bharat QR, UPI, wallet transactions, and standard card payments, all through a single POS device. This approach grants customers a range of payment choices while enabling merchants to accept diverse forms of payment through a unified device.
Amid the pandemic, which has driven innovations in contactless payments for safer transactions, Hitachi is expediting the adoption of Near Field Communication (NFC) based contactless card payments. This functionality allows customers to conveniently tap or wave their cards over the POS machine to complete payments swiftly, enhancing the checkout process for both customers and merchants.
Simultaneously, the emergence of the Soft POS solution, which transforms a merchant's smartphone into a POS terminal, is poised to empower countless micro and small merchants. This technology permits them to embrace digital payments without the need to invest in traditional POS machines.
Spanning the entire spectrum of payments, Hitachi's comprehensive solutions encompass Internet Payment Gateway Solutions, Digital Payment Platform (Bharat QR), and Toll & Transit Solutions. These offerings enable banks and merchant aggregators to furnish inventive and secure digital payment services to merchants and their clientele.
Supported by extensive industry expertise, a robust payment infrastructure, nationwide coverage, and end-to-end services, Hitachi continues to fuel the expansion of acceptance infrastructure. In doing so, it provides a seamless payment experience for the tech-savvy citizens of a thriving Digital India.
It's evident that technology is evolving in tandem with end users, and the variety of use cases is expanding due to the emergence of new payment avenues. Payments hold a central position within financial institutions, making it increasingly important for central banks to offer innovative solutions to remain relevant. One such avenue is the Central Bank Digital Currency (CBDC), which aims to assist central banks in providing extensive financial services. The Reserve Bank of India (RBI) envisions the e-Rupee or Indian CBDC as the next-generation seamless, widely accessible, and anonymous payment method that delivers value and a satisfying customer experience.
The e-Rupee has the potential to serve as a viable substitute for physical currency. The traditional issuance and circulation of paper money involve lengthy processes and substantial costs incurred by the government. For instance, producing and distributing an INR 100 note accounts for about 15%–17% of the overall expenses within a four-year lifecycle, covering printing, distribution, and replacement due to wear and tear.
As physical currency circulation increases, it places strain on distribution and storage systems, while also contributing to environmental concerns due to its carbon footprint. The proliferation of physical cash poses challenges to regulatory bodies and governance in terms of printing, distribution, and storage, consequently giving rise to risks such as counterfeiting, deterioration, and security vulnerabilities. Counterfeit currency poses a significant threat, as the RBI noted an uptick in fake 2,000 and 500 notes in the fiscal year 2021–22. Carrying cash also entails the risk of loss or theft. The e-Rupee empowers central banks with better control over utilization and distribution, serving as a key motivation for the RBI's CBDC initiative.
Introducing the e-Rupee in India signifies a stride towards a digital economy, especially given the increasing adoption of mobile and internet-based payments. This move could also streamline complex cross-border transactions. Enhancing cross-border payments has been a major focus of the G20, with CBDC being seen as a potential solution. Traditionally, cross-border transactions involve time-consuming processes with rigorous compliance checks, dependent on correspondent banks' availability and time zones. Financial institutions holding reserves with the RBI can engage in CBDC transactions, thereby reducing counterparty risks. Additionally, CBDC's automation of transaction and settlement processes is expected to expedite the overall procedure. CBDC can also be leveraged in other areas such as government securities and international forex trading to facilitate transactions.
The design of CBDC is contingent on its intended functions, as highlighted in the RBI's concept note. The implications of CBDC on payment systems, monetary policy, and the stability of the financial system will be shaped by its design. A key consideration is to ensure that the design features of CBDC are the least disruptive.
