Indian’s Greatest Tech Export
UPI has changed the way Indians transact. Can it change the way the world transacts?
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The branch of education that is most highly coveted in a country often reflects the industry with the strongest nexus with the government.
In India, that branch of education is Engineering. More specifically Computer Engineering.
Infosys, TCS, Satyam, HCL and many others gave birth to large software services organisations in the 1980s and early 90s. They needed engineers and the politicians obliged by opening a whole bunch of engineerings colleges that produced engineers who could not engineer a thing.
For almost two decades, they all were recruited in droves; paid salaries that a shade above the poverty line by these companies; trained for 6 months and put on the job.
When computers were first created, the men only did the hardware. Women coded the punchcards. Women like Grace Hopper invented software. And then the men came up with Software Engineering to make the field seem esoteric and to push women out of the field.
Alas! They succeeded.
The nexus between industry and politicians produced a glut of engineers. Eventually, this would result in some of them realising that they could build products of their own.
To date, India’s greatest software product has been Zoho. Without raising a dime from venture capital the company has turned into a global behemoth.
There is another such product that hundreds of millions of people use which is starting to go global. And it was not created by a tech entrepreneur.
The National Payment Council of India was founded as a quasi-banking company by the Reserve Bank of India. In 2008, the need to create stronger online pipes for banking was felt and the organisation was created as a not-for-profit with 10 of the biggest Indian banks as stakeholders. This was done to ensure that the adoption would not be a problem.
The National Electronic Fund Transfer (NEFT) and Real-Time Gross Settlement (RTGS) protocols were handed over to the NPCI and it was tasked with creating a Mobile Money Identifier (MMID) based transaction protocol. The thinking was that this would take advantage of the burgeoning mobile phone base. Even the unbanked seemed to have mobile phones. The MMID was a tremendous failure but building on it came the Universal Payments Interface (UPI).
This sounds like a conspiracy theory but UPI was launched in April 2016, just before the disastrous demonetisation of October 2016. In the wake of demonetisation, India saw a huge surge in online payments. It became the way of life.
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UPI being an open protocol made it possible for many startups to jump in to take advantage of UPI. All those engineers were by 2010 making products from India. They built products with UPI integrated into them. Also, the MMID being layered on UPI meant that your phone number references your bank account(s). Anybody can ask for your phone number and transfer money to you. Because it is that simple, everyone, from the educated to the uneducated and even the daily and hourly wagers are now using UPI. Just last week the RBI announced that UPI will not work on feature phones as well without the need for an internet connection, using SMS.
The volumes of transactions have exploded. In Jan 2017, 4.4 Million transactions valued at about 200 Million dollars were processed. In Jan 2022, 4.5 Billion transactions valued at more 100 Billion dollars were processed.
India’s GDP is less than USD 3 Trillion. UPI is taking a considerable percentage share of it. Now we have started exporting this with the heft of all of the banking organisations in India and the government.
The international branch of the National Payment Corporation of India, NPCI International Payments Ltd (NIPL), has collaborated with Mashreq, among the UAE's top financial firms, to enable the implementation of its mobile-based real-time payment system, Unified Payments Interface (UPI), in the UAE.
Source: Good Returns
LuLu Financial Holdings (LFH)- an Abu Dhabi-based holding company investing in financial services has inked an agreement with NPCI International Payments Limited (NIPL)- a wholly-owned subsidiary of National Payments Corporation of India (NPCI), to offer real-time remittances to India. The partnership will enable LuLu Financial Holdings through its affiliates to connect to UPI infrastructure and facilitate remittance to beneficiaries in India who are onboarded on UPI-powered apps. The solution will assist with real-time beneficiary name validation and facilitate requisite compliance checks in a secure manner.
Source: IBS Intelligence
The Middle East and specifically UAE is the first target because there is so much remittance that flows back to India from the region.
“Western Union’s account payout network enables payout into billions of accounts globally – these accounts are not just limited to bank accounts; it’s any consumer account globally, whether it be at a bank or even a mobile wallet or card,” said Sohini Rajola, Head of Middle East and Asia Pacific, Western Union. “Customers want more, and our account payout network capability represents a natural evolution in Western Union’s cross-border platform and omni-channel strategy to reach new digital-savvy, banked and mobile enabled consumers.”
Source: eLets Online
Being able to take advantage of the Western Union (WU) network is a huge force multiplier. Especially for Indians making remittances back to India, they would be able to use the power of UPI and put the money straight into the account of the person. Today, the receiver has to visit a WU branch and collect cash or cheque.
The Reserve Bank of India (RBI) and the Monetary Authority of Singapore (MAS) on Tuesday announced a project to link their respective fast payment systems — Unified Payments Interface (UPI) and PayNow which will facilitate instant low cost cross border fund transfer.
The linkage is targeted to be operationalised by July 2022.
Source: The Hindu
Thanks to China, it increasingly looks like Singapore will play that role that Hong Kong once played in Asian finance.
The National Payments Council of India (NPCI) announced yesterday (Feb.17) that Nepal has adopted the interface to bolster digital transactions. Launched in 2016, UPI enables interoperable person-to-person and merchant payment transactions. The NPCI regulates digital payments in India.
The move will also enable cross-border remittances between the two south Asian countries.
Slowly and steadily NPCI is going after all of the countries that are in its immediate vicinity, which may not have their payments eco-system developed very well.
National Payments Corporation of India (NPCI) on Thursday said its international payments arm NPCI International Payments Limited (NIPL) has signed a memorandum of understanding with TerraPay, Netherlands-based global payments infrastructure company to allow Indians with an active UPI ID to receive real-time, international payments into their bank accounts via TerraPay’s secure payments technology.
The international tie-ups with various payment processors are coming thick and fast. PPRO, Terrapay, FSS and even banks with their own Money Transfer Partners.
There is a web of relationships that are being forged slowly and steadily. The only challenge that remains is adoption. Believe me, it is a huge challenge. In India, demonetisation greased the wheels of UPI.
But on the flip side, a company like Google is reaching the end of the line so far as advertising is concerned. They have one of the most dominantly used UPI apps in India. Will this offer them a segue to becoming a prominent payment processor globally?
It is going to be interesting to watch this play out. If this succeeds, NPCI could become an organisation with power comparable to that of Visa and Mastercard.
The current sanctions being imposed by the West on Russia is also causing many nations to stop and think. Should SWIFT / Visa / Mastercard be the only way? NPCI also has the RuPay Card.
The funny thing is, many of the users won’t even find out that their transactions are being run on UPI rails. Even if it does succeed, it will be a very silent success.