India’s UPI Success May Chart Path for Real-Time Payments in the US

India’s United Payments Interface (UPI), the real time payments system, is showing explosive growth.

And the tailwind to digital payments adoption, along with linkages to other countries’ real time network — forging an interoperable network — may prove instructive here in the states, as the Federal Reserve charts its own real-time payments journey.

In terms of the mechanics, the Reserve Bank of India-founded UPI traces its genesis to 2016 and enables instant money transfers, directly between bank accounts. As has been well-documented through the past several years, India’s been shifting away from cash usage, pursuing a path of demonetization and actively shepherding citizens to leave the coins and bills by the wayside.

As to the traction itself, the National Payments Corp. of India (NCPI) has estimated that in 2022, the total tally of UPI transactions surged by 91%, and the value of those transactions was up by 74% over 2021’s levels to more than $1 trillion USD equivalent. The appeal of immediate payments, 24/7, using the mobile device as a conduit, has caught on — especially with the financial services providers, where the tally of participating banks surged from 21 at the time of the initial pilot to more than 350 banks at present.

To that end, and as reported by sites including The Economic Times, Reserve Bank of India Governor  Shaktikanta Das has stated that more countries have been interested in collaborating with and linking with UPI to power digital transactions across borders. Das noted that as many as a half dozen countries could sign up as collaborators. Singapore’s PayNow is already actively linked with UPI. And earlier this year, India that it is widening UPI access to non-resident Indians in several other countries. Those countries include Singapore, the U.K., Australia, Canada and the U.S.

Broadening Access and Use Cases

The geographic broadening of access, as noted above, represents a true internationalization of digital payments in general, and real-time payments specifically.

By enabling payment systems in one region to integrate seamlessly with a payment system elsewhere, card issuers and various providers to enable consumers to transact with businesses — and businesses to transact with one another — without the need for a staggering array of intermediaries or having several bank accounts across various countries.

We’ve noted that one area of low-hanging fruit lies with remittances — and, indeed, UPI has estimated that P2P transactions were 49% of volume last year. But beyond those use cases, there are a few guideposts offered by India’s real time payments success for developing efforts in other nations, including the United States.

Collaboration between the private sector — banks, yes, and non-bank entities too (FinTechs among them), the payment networks too, will help foster the increasing use of digital wallets. As PYMNTS has estimated, digital wallets are gaining at least some ground in terms of online spend. The natural path forward may be to start local, so to speak, and then push interoperability, much in the way India’s been doing, in ways that can truly transform cross-border commerce (particularly, we note, in finance and in B2B).

Consumers may have the devices (and increasingly, the digital wallets) in hand to transact in real time and seamlessly as they travel, but there’s still some “build out” in the background to tackle.

FedNow, of course, is launching this year. And in a nod to the complexities of it all, and in embracing new messaging standards: There’s been a rescheduling by CHIPS, the largest private sector clearing and settlement system to the new ISO 20022 standard to April of next year, when the target date had been November of 2023. Richard Dzina, senior vice president of product development for CHIPS at The Clearing House, told PYMNTS that the delay has come as other jurisdictions have experienced delays.