In recent years, India has become a major player in the digital payment space, outpacing its allies and rivals. In 2022, 46 per cent of real-time global digital transactions took place in India, and the nation has become the second-largest digital market in the world, closing in on China in first place. As the globe continues to move towards a cashless existence, Indian software could come to dominate the financial world.
The Unified Payments Interface (UPI) was developed by the National Payments Corporation of India (NPCI) in 2016. It is a system “that powers multiple bank accounts into a single mobile application”, allowing users to make peer-to-peer and peer-to-business payments via their phone on an app. This can be done with users or merchants using the same app, or by scanning QR codes. It is extensively used in India, with more than 300 million active users, and in 2023 facilitated 117.7 billion transactions, accounting for around 183 trillion Indian Rupees, and the rate of use is still growing exponentially. India is well suited for adopting this digital system. The eCommerce company EBANX has noted that India has “the fastest-growing number of digital buyers since 2017”, with projections expecting 400 million by 2017.
Unlike WeChat Pay and Alipay, which are owned by private tech companies, UPI is owned by the Indian government.
Functionally, UPI is very similar to the Chinese digital payment systems WeChat Pay and Alipay. However, UPI has one key difference. Unlike WeChat Pay and Alipay, which are owned by private tech companies (though the Chinese government maintains a one per cent hold of shares in each company), UPI is owned by the Indian government.
From its inception, it has been designed to integrate with government systems and banks. In comparison, its Chinese counterparts have often privately and publicly wrestled with the government over its control and direction. For example, international users have long had difficulty accessing these systems without a Chinese bank account and it is only in recent years that the companies responsible have been pushed to enable foreign bank accounts the ability to integrate.
UPI, on the other hand, is far more accessible for non-Indians, who are easily able to upload money from their preferred bank cards into UPI digital wallets, and then use them for Indian businesses – a feature that Chinese apps did not add until last year. UPI was built from the ground up by government interests, while Chinese payment systems react to proclamations from above. As a result, UPI can be more easily wielded as a tool for soft power and economic expansion by India, one which they have readily taken advantage of.
The National Payments Corporation of India and the Reserve Bank of India (RBI) have been moving intently to internationalise UPI, setting up NPCI International Payments (NIPL) in 2020 with that express aim. The head of the NPCI proclaimed that “It is a matter of pride for NPCI that several [regions] such as Asia, Africa and the Middle East have displayed interest towards replicating our model in their own [nations].” Since then, NIPL has been able to expand UPI to Malaysia, Singapore, Australia, Canada, Hong Kong, Oman, Qatar, the United States, Saudi Arabia, UAE, and the United Kingdom. Other countries, such as France, have begun to utilise UPI QR codes and systems for Indian tourists.
NIPL has also started working with other countries to help develop their own digital payment infrastructure, creating similar systems as well as integrating UPI into their economies. The NPCI and RBI have ambitions to go further, including with Operation Rupee Global, which aims to establish UPI in 20 counties by 2028–29.
UPI can also be used to bypass the SWIFT banking system, enabling payments with sanctioned countries such as Russia, thereby weakening US financial hegemony.
If Operation Rupee Global succeeds, and UPI expands across the world, it could establish India as a major power in international finance, strengthening the country’s currency. In this scenario, it is significant that UPI can also be used to bypass the SWIFT banking system, enabling payments with sanctioned countries such as Russia, thereby weakening US financial hegemony.
Such success will also support India’s Digital Rupee, a central bank digital currency that uses blockchain technology. The Digital Rupee, which had its pilot launched in November 2022, has been integrated with UPI, helping it ease in new users and speed up cross-border payments. The currency reached a peak of one million retail transactions per day in December 2023. However, since then it has reportedly fallen to 100,000 per day, signalling that it has a long way to go before being fully adopted by the Indian public.
As the world moves towards a cashless society, more money will flow through these payment systems. Right now, India is firmly placed to be the global leader in online digital payments. It has both the tech and the political will to expand across the world and the digital domain.
