UPI
Indian digital payment systems are available in Singapore, UAE, Oman, Saudi Arabia, Malaysia, France, BENELUX markets – Belgium, the Netherlands and Luxembourg – and Switzerland, among others. It is also understood that India has signed MoUs with 13 countries that want to adopt the UPI interface for digital payments.
India has been making significant strides in expanding the network of its digital payment systems like RuPay, UPI (Unified Payments Interface), etc. Globally, with Europe being among the latest regions to accept India’s payment systems. Other countries that have embraced different forms of Indian payment systems include France, UAE, Saudi Arabia, Bahrain, Singapore, Maldives, Bhutan, and Oman. This implies that Indians will now be able to make payments through UPI, RuPay etc. in these countries. India's digital payment system enables seamless cross-border transactions. This is lowering cost of fund transfers and remittance payments.
1) Helping India becoming more integral to globalised economy,
2) Supporting the fintech ecosystem,
3) Better foreign remittance - During 2021-22, India received foreign inward remittances of $89,127 million which was the highest ever inward remittances received in a single year.
The UPI-PayNow interlinking will further anchor trade, travel and remittance flows between the two countries and lower the cost of cross-border remittances. The tie-up will significantly boost remittances to India, thereby creating an impact on the economy,
4) Empower businesses and individuals with frictionless transactions beyond borders, making international commerce more accessible and convenient than ever before.
5) This tie-up will enhance international payments with multi-currency support, so it will lead to improved business volumes for SMEs by facilitating overseas payments and thereby, enables businesses to expand globally
India’s digital payment systems: UPI accounts for major chunk of transactions
Meanwhile, the UPI’s popularity in India has been expanding ever since its launch in 2016. As per a recent report by Worldline titled ‘India Digital Payments Report’, India saw 20.57 billion online transactions worth INR 36.08 trillion in the second quarter of financial year (FY) 2022. The country’s online transactions were processed through debit and credit cards, prepaid payment instruments like mobile wallets and prepaid cards, and UPI which includes P2M (person to merchant) and P2P (person to person) transactions.
The report stated that UPI P2P accounted for 49 percent in volume and 67 percent in value but in terms of merchants’ transactions, UPI P2M emerged as the preferred payment mode with a market share of 34 percent in volume and 17 per cent in terms of value.
UPI : Emergence in India
However the story for india started with, De-monetisation of the Indian currency and the launch of NPCI's UPI (unified payment systems) which was first introduced in India on April 11, 2016. It was launched by the National Payments Corporation of India (NPCI) as a real-time payment system that facilitates inter-bank transactions by instantly transferring funds between two bank accounts on a mobile platform.
India adopted UPI payments rapidly, with many banks and payment service providers integrating the UPI system into their mobile applications. UPI has gained widespread popularity and is now one of the most preferred payment methods in India, with over 2 billion transactions processed in January 2022 alone.
De - monetisation in India took place, on November 8, 2016, the government's decision to withdraw the legal tender status of all Rs. 500 and Rs. 1000 banknotes and replace them with new Rs. 500 and Rs. 2000 banknotes. The move was aimed at curbing the circulation of black money and promoting a cashless economy.
UPI was designed to provide a simple and secure platform for instant interbank transactions using mobile phones. UPI has been instrumental in promoting digital payments in India, especially after demonetization, as people turned to digital payments to overcome the cash crunch caused by the withdrawal of high-denomination banknotes.
India promoted digital payments right before demonetization to encourage the adoption of digital payment systems and reduce the dependence on cash transactions in the economy. The government recognized that digital payments could help curb corruption, reduce the circulation of black money, and promote financial inclusion, especially for the unbanked population.
The benefits of having digital payments and UPI IDs in relation to black money are significant. Here are some of the key advantages:
Traceability: Digital payments leave a digital trail that can be traced and audited, making it easier to track the flow of money and detect any suspicious or illegal activities.
Accountability: Digital payments promote greater accountability, as all transactions can be recorded and verified, making it harder for individuals to hide or launder money.
Reduced cash usage: Digital payments reduce the circulation of physical cash, which is often used in black money transactions. This makes it more difficult for individuals to hide their financial transactions from the authorities.
Financial inclusion: Digital payments, especially UPI, have helped promote financial inclusion by enabling individuals to open bank accounts easily and participate in the formal financial system. This reduces the dependence on cash transactions and the informal economy, which often facilitates black money transactions.
Promoting digital payments and introducing UPI just before demonetization was a strategic move by the Indian government to reduce the circulation of black money, promote financial inclusion, and bring more transparency and accountability to the economy.
Digital Payments Globally
Digital payments were being used globally around the same time as in India, with various countries promoting cashless transactions and digital payments through the development of new payment technologies.
For example, in China, digital payments through mobile payment systems like Alipay and WeChat Pay had already become ubiquitous before India's launch of UPI in 2016. In the United States, payment technologies like Apple Pay and Google Wallet had also been introduced, although the adoption of digital payments in the US has been slower compared to other countries. In Europe, the use of digital payments was also gaining traction, with initiatives like the Single Euro Payments Area (SEPA) promoting cross-border electronic payments. Additionally, in countries like Sweden and Norway, cashless transactions had become so common that some businesses had stopped accepting cash altogether. Overall, the use of digital payments was on the rise globally in the years leading up to India's launch of UPI in 2016, with many countries looking to reduce cash usage and promote the benefits of digital transactions.
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