UPI gains traction internationally

Written by Kapronasia || March 12 2024

India’s United Payments Interface (UPI) payments rail is the most successful initiative of its kind. Domestically, UPI has achieved a dominance that no other payments rail is likely to surpass. According to a report by PwC, it is projected that daily UPI transactions will reach 1 billion by FY 2026-27, representing approximately 90% of India's non-cash transactions. 2024 started with UPI transactions processed in January reaching a record high of INR 18.41 trillion. Given UPI's success, India has sought to expand its footprint internationally and in the past few years it has become available in a number of countries from the United Arab Emirates and Bhutan to the UK and France. Yet questions remain about whether UPI can serve as a foundational platform for digital payments outside of India.

As UPI seeks to grow outside of India, the experience of Alipay could be instructive. Alipay was so successful in China and expanded so quickly in Southeast Asia that at one time it seemed the Chinese super app might preside over an entire regional digital payments ecosystem. However, the payments infrastructure was never in place for that to happen, while each country in the region has unique regulations and consumer habits. Ultimately, the Chinese company scaled back its ambitions and shifted to a focus on enhancing interoperability among the many e-wallets in Asia with Alipay+.

With that in mind, UPI can likely achieve the most success outside of India by focusing on niche markets. For instance, in countries where there are lots of Indian migrant workers, like the UAE and Singapore, UPI can concentrate on winning their business for remittances rather than trying to compete in multiple payments segments. India received the most remittances in the world last year, valued at US$125 billion, so this is a significant niche market.

In certain cases, UPI will have the opportunity to build a key part of a country’s digital payments infrastructure and thus tap into a more diverse array of market opportunities. This is the case in Nepal, which geographically and culturally is a good fit for UPI. On March 8, the NPCI – which has inked an agreement with Nepal’s largest payment network Foneway Payment Service – said that UPI is live in the mountainous South Asian country. Users of the platform can now scan QR codes to make payments to Nepalese merchants. In its first phase, the partnership will enable Indian consumers to make instant, secure, and convenient UPI payments across various business stores in Nepal by using UPI-enabled apps.

Separately, in late February, numerous World Trade Organization (WTO) organization member countries reportedly backed India’s proposal to reduce the cost of cross-border remittances – which if adopted would almost certainly boost UPI’s global reach.