With the National Payments Corporation of India (NPCI) leading the charge to take the Unified Payments Interface (UPI) globally, India has the opportunity to define the global standards for interoperable payments, says Sameer Nigam, founder and chief executive officer, PhonePe.
“India’s role in the global market will depend on how UPI is allowed to scale internationally with interoperability and our regulator’s stance on the merchant discount rate,” he said during a panel discussion at the Internet and Mobile Association of India’s 15th Digital Money 2020 conference on December 1. While the NPCI had set up NPCI International Payments Ltd in August this year, several domestic payments companies are also looking at expanding internationally.
PhonePe wanted to expand to 2-3 foreign markets this year and though the timing seemed right at the time, the pandemic struck and deferred these plans, Nigam said. “We absolutely want to go international next year but I don’t think we can distract ourselves from this market. We are really waiting for UPI to go international because of the interoperability aspect. I think globally interoperability standards will emerge over the next 5-10 years especially around remittance,” he said.
Nigam added that he is curious to see how the New Umbrella Entity (NUE) plays out, since it requires interoperability of a new network with UPI or NPCI. “There are two ways this plays out; either the standard becomes public or the code becomes public. If the UPI model is almost operating like public code repositories then the global adoption can be very accelerated,” he said.
Taking UPI global
The development of interoperability standards between the NUE and NPCI could also lay the foundation for UPI to be taken abroad. UPI has received considerable attention globally, with Google recommending that the US Federal Reserve implement a real-time payments platform on similar lines and the Bank for International Settlements (BIS) stating in a December 2019 paper that UPI’s can be scaled and connected to a payment rail in another country to enable cross-border payments, seamlessly within the existing environment.
The Reserve Bank of India (RBI) has in fact told the BIS in its submissions that UPI can be scaled or used to design a cross-border payments solution globally, as it ticks most of the 19 principles laid out by the BIS’ Committee on Payments and Market Infrastructures, said P Vasudevan, Chief General Manager, Department of Payment and Settlement Systems, RBI, during the event.
Vasudevan, however, cautioned that there should be enough capacity among domestic players to ensure that various risks, like cyber security do not get exacerbated when they are looking at international expansion. “We get a sudden scare when volumes are increasing so much and technical declines are equally increasing. So if the systems need to be scaled up, if people have adequate resources, only then they should go for upscaling or globalisation,” he said.
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