India: Google offers advice to the Fed on FedNow

Google sent a letter to the Federal Reserve, asking the US central bank to consider modeling FedNow after the Unified Payments Interface (UPI) framework used in India, The Economic Times (ET) reported on Sunday, December 15. FedNow is the new interbank real-time gross settlement (RTGS) service that will offer integrated clearing functionality for faster digital payments.

Mark Isakowitz, Google’s head of US government affairs and public policy, wrote in a letter to the Fed that Google “worked closely” with the National Payments Corporation of India (NPCI) to build Google Pay for the Indian market. NPCI, the payment regulator governed by the Reserve Bank of India (RBI), launched real-time payments in 2016.

“First, UPI is an interbank transfer system. … Second, it is a real-time system. Third, it is ‘open’ — meaning technology companies can build applications that help users directly manage transfers into and out of their accounts held at banks,” Isakowitz wrote, according to ET.

The system in India was quickly and widely adopted, and jumped from 100,000 monthly transactions three years ago to 1.15 billion now.

“Google has been a successful market participant in India’s use of UPI, and Google Pay provides one of the three leading mobile applications that use UPI, as measured by transaction volume,” the letter stated.

Monthly users of Google Pay hit 67 million in September, an increase of 45 million over September 2018. A recent Assocham-PWC study has indicated that digital payments in India will grow to US$135.2 billion in 2023 from US$64.8 billion in 2019.

“Every transaction made on Google Pay is done through our partnerships with India’s banks over UPI. This success is mutual as between tech financial services and government,” the letter indicated. 

Google stated it can use what it learned from the experience with India to offer the Fed specifics to “support real-time low-value and high-value payments, use standardized messaging protocols with extended metadata, and provide clear standards for an application programming interface (API) layer that enables licensed non-financial institution third parties to access and submit requests into this payment system.”

Immediate Payment Service (IMPS) and UPI are proving to be game-changers for India’s community of more than 100 million migrants participating in the nation’s workforce — one-fifth of India’s workforce.

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