Google has cited the example of India’s Unified Payments Interface (UPI), to the United States Federal Reserve for its proposed FedNow — a new interbank real-time gross settlement service. The company said that it worked closely with the National Payments Corporation of India (NPCI), which deployed the UPI, and added that UPI was “thoughtfully planned and critical aspects of its design led to its success”.
Google’s remarks came in response (see below) to a paper by the US Federal Reserve, released in August 2019, to develop a new interbank “24x7x365” realtime gross settlement service, for which the body had invited comments. Google had responded to the Federal Reserve on November 7, but their submission surfaced on December 14. The FedNow service is expected to go live in 2023 or 2024, and would initially support values upto $25,000.
Based on its learnings from UPI, Google recommended that the government and industry and should work together to grow ecosystems where payments are inclusive. It also said it sees the future of online payments as mobile first.
“The approach in India attained amazing results for banks, consumers, other players within the payments ecosystem and India’s central bank. Adoption of the system [UPI] was rapid, growing from 100,000 monthly transactions, to 77 million, to 480 million, to 1.15 billion monthly transactions in the first four years. After just three years, the annual run rate of transactions flowing through UPI is about 10 percent of India’s GDP, including 800 million monthly transactions valued at approximately 19 billion USD.” — from Google’s submission to the Federal Reserve.
The letter, which was signed by Mark Isakowitz, Vice President, Government Affairs and Public Policy, US & Canada, Google, also said that FedNow should be an open system “akin to UPI,” because this “openness fosters collaboration between technology and financial services providers”. The fees to access and use FedNow must be sufficiently low to encourage market participation by both technology and financial services providers, the company said.
Calling for standardised API integration of FedNow, Google said that a clear and unified standard API interface available to both technology and financial services providers is “essential”. “In India, the provision of such a standardised API has enabled technology companies to quickly integrate and work with over 140 banks that utilise the UPI system. In contrast, in economies where such a standardised API is not available, or one in which technology companies are not provided access, more complex and sometimes incompatible API standards have required custom work for integration between each pair of technology and financial services companies,” Isakowitz added.
“We’ve been pretty vocal that we believe the right model for driving digital payments is through partnership between banks, governments & tech companies through open and standards based infrastructures like UPI,” said Caesar Sengupta, Lead Payments & Next Billion Users, Google, in a tweet.
UPI, originally launched in April 2016, has been a massive success in the country. FY2017 saw 17.8 million transactions made via UPI whereas in April 2019 alone, 781.7 million transactions were made using UPI; in October 2019, that number reached 1.14 billion, according to data released by NPCI. Google Pay, previously Google Tez, launched in September 2017, and claims to have 67 million monthly active users (MAUs) as of September 2019.
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