Bharat's UPI to Link with Singaporean PayNow, Making Cross-Border Transactions Easier and Cheaper
Oct 12, 2021
The two nations' banking system regulators struck an agreement which will become operational in 2022. Users on both sides are expected to enjoy a more affordable access to remittance payments with their current online banking setup.
India and Singapore to Simplify Transnational e-Banking
The National Payments Corporation of India (NPCI) has recently announced that the leading Union payment system, UPI, will be operationally linked with its counterpart in Singapore. The collaboration will let current system users make direct, "instant and low-cost" payments towards each other's banking systems without having to register elsewhere.
The two nations are aiming to disrupt the fintech sector with the move, lowering average costs of remittance payments and allowing a more direct access to each other's online markets. Indians are the third largest ethnic group in Singapore, a country small but economically well-advanced.
The United Payments Interface (UPI) is the market leader domestically, used by consumers to pay bills, shop, send each other money and buy online lottery tickets in India or play online casinos in India. The service is enabled by over 200 participating banks. PayNow is a similar platform made available by the Monetary Authority of Singapore (MAS) and local commercial banks. The system lets users send and receive money by using just their mobile number, in addition to paying for other expenses and person-to-merchant transactions.
The volume of financial transfers between India and Singapore currently amounts to over $1 billion annually. The link between the two payment systems is expected to become operational in July of 2022, enabling transfers and online payments directly from one's domestic interface. Experts anticipate that this will greatly increase the amount of trans-national operations between the two nations.
The NPCI had previously deployed its International Payments arm (NIPL) to strike similar cross-border payment agreements with banking regulators in Malaysia, the UAE and Bhutan, among other countries.
An Indian Fintech Success Story
It has been, in reality, only about five years since the UPI launch. Overseen by the Reserve Bank of India (RBI), it is based on a banking coalition, quickly becoming the dominant way of making digital payments, both online and in local communities. Much of its popularity is also due to the possibility of instant peer-to-peer money transfers and shared payments.
Commercially, the NPCI scored early success with its system adoption by most digital and fintech giants, including Google, Facebook (with its subsidiary WhatsApp) and Amazon. All three have their integrated payment services, adding to the transaction gateways of PhonePe and Paytm. Presently, UPI handles around 3 billion monthly payments. The RBI expects the registered user base to rise from 100 million currently to over 500 million in 2025.
The RBI Chief General Manager, Yogesh Dayal, said earlier in a press statement that this new project is a "significant milestone" in improving cross-border payment infrastructure. In line with G20 financial inclusion priorities, it is expected to make international banking transactions cheaper, faster and more transparent.
Globally, remittance payment commissions are reported at an average of 6.5%. Neither NPCI nor MAS have announced the fee structure of the new integrated payment service.