In a significant development in the cross-border payments sector, the Reserve Bank of India (RBI) and the Monetary Authority of Singapore (MAS) announced that they will link their respective payment systems, Unified Payments Interface (UPI) and PayNow respectively by July 2022.
The RBI in a press release claimed that this linkage “would enable the two payment systems’ users to make fund transfers without the need to use another payment system”. The central bank said that the linkage builds upon the earlier efforts of the NPCI International Payments Limited (NIPL) and the Network for Electronic Transfers (NETS) to facilitate cross-border interoperability of payments using cards and QR codes, between India and Singapore.
This development comes at a time when many private players in the payments industry consider cross-border payments as the next big opportunity. Earlier, in May, Worldline India’s head of digital commerce Ramesh Narasimhan said that the company was investing substantially in this area.
“This initiative is also in line with RBI’s vision of reviewing corridors and charges for inbound cross-border remittances outlined in the Payment Systems Vision Document 2019-2,” the central bank said. Singapore’s PayNow is a payment system that enables peer-to-peer funds transfer service, available to retail customers through participating banks and Non-Bank Financial Institutions (NFIs), RBI said.
Commenting on the RBI’s announcement, Asheesh Chanda, Founder and CEO of Kristal.AI said, “From an investing perspective, this will incentivize more retail investors to access global markets. Currently, they pay upto Rs.3,000 in inter-bank charges which are over and above the LRS processing fees by banks. This eats into their returns and hence discourages small investors from accessing global markets. The project is a welcome initiative and we look forward to its final rollout.”
Linkage aligned with G20’s financial inclusion priorities: RBI
RBI also said that the linkage was aligned with the G20’s financial inclusion priorities of facilitating cross-border payments.
What are G20’s financial inclusion priorities? The “Digital Financial Inclusion: Emerging Policy Approaches“ report of G20 Global Partnership for Financial Inclusion (GPFI), calls for promoting digital financial services (such as cross-border payments) through monitored national strategies and action plans.
It also emphasised the need for policy leadership and coordination across the public and private sectors as critical for expanding financial inclusion.
RBI’s regulatory sandbox involves cross-border payments
The RBI regulatory sandbox’s second cohort deals with cross-border payments. The bank received 27 applications from 26 entities during the application from December 21, 2020, to February 15, 2021, the Hindu Business Line reported.
The RBI disclosed that testing of products will commence from the third week of September 2021, the report added. Eight entities were selected for the test phase of the second cohort:
- Book My Forex,
- Cashfree Payments,
- Fairex Solutions,
- Nearby Technologies,
- Open Financial Technologies,
- SoCash India,
- Wall Street Finance.
PayPal shut payment gateway services to focus on cross-border services
PayPal India shut down its payment gateway business in India from April 1, 2021, onward. But the company said that it will continue to provide payments services for cross-border trade.
“We believe PayPal can have the greatest positive impact in India’s economic recovery by pivoting our business to support our customers where they need us most. From 1 April 2021, we will focus all our attention on enabling more international sales for Indian businesses, and shift focus away from our domestic products in India. This means we will no longer offer domestic payment services within India from 1 April,” a spokesperson for PayPal said.
PayPal said that it had processed $1.4 billion worth of sales for more than 360,000 merchants in the country in 2020, through its now-defunct payment gateway.
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Update, September 17, 5:54 pm: The designation of Ramesh Narasimhan was incorrectly put as Worldline CEO. It has been rectified to ‘head of digital commerce’.