India seeks payment-system links in every FTA, Commerce Secy says: Report

India is seeking to link its payment systems with those of its trading partners as part of every free trade agreement it negotiates, as New Delhi pushes to make cross-border payments faster and cheaper, Bloomberg reported on Wednesday.

“Every free trade agreement we negotiate, there is also a discussion around how we can align our payment systems and harmonize our payment system to talk to each other, especially in countries where India has a huge diaspora,” Commerce Secretary Rajesh Agrawal said on Wednesday at the Global Fintech Fest in Mumbai, according to Bloomberg.

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The comments signal that payment-system interoperability is becoming a regular feature of India's trade negotiations. Provisions to improve payment links were included in India's recent trade agreements with the European Union and New Zealand, Bloomberg reported, although officials had not previously outlined the broader strategy publicly.

Prime Minister Narendra Modi on Tuesday said India aims to link its real-time digital payments network, the Unified Payments Interface, with countries that are home to its large diaspora. UPI is currently live in 11 countries, and India is looking to expand its presence to more markets.

Agrawal's remarks come as the government seeks to expand India's services export basket beyond its traditional strengths in information technology and professional services. He said India should leverage its experience of building fintech solutions at population scale to become a major exporter of digital financial services.

“Now it's time to see whether we can use this unique experience to take these services across the world,” Agrawal said.

He said countries across Asia, Africa and Latin America face challenges similar to those India has addressed, including large informal sectors, dependence on cash and limited access to financial services outside urban centres.

Agrawal said Indian fintech companies should work with local institutions and entrepreneurs to develop solutions suited to individual markets, rather than simply exporting Indian products.

Cross-border payments could be a significant opportunity, particularly given India's large remittance flows. Agrawal said India receives more than $125 billion in remittances annually and that multiple intermediaries and currency conversions keep transaction costs high.

“If this cost comes down from 6% to 3% for Indian migrant workers, it will be additional $5 billion in their hands,” he said.

India's 35 million-strong diaspora sent home more than $155 billion in remittances in the fiscal year ended March, making remittances an important source of foreign currency inflows, Bloomberg reported.

Agrawal also identified digital lending, insurance, wealth management, investment services and trade finance as areas where Indian fintech companies could develop exportable solutions.

He cited the Unified Payments Interface as a key example of India's digital public infrastructure, saying the system had demonstrated how identity, consent and data technology could be combined to expand financial inclusion while reducing transaction costs.

India's transition from a predominantly cash-based economy to one increasingly driven by digital transactions has created an experience that could be adapted for other countries, particularly in the Global South, he said.

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The government is also looking to use India's free trade agreements to create pathways for financial-services exports. Agrawal said India has signed agreements covering services trade, including financial services, with multiple countries and has signed memoranda of understanding with 23 countries on cooperation in digital public infrastructure.

He also highlighted GIFT City and the International Financial Services Centres Authority as potential gateways for exporting financial services, with the aim of eventually using the financial hub as a base to serve overseas markets.

Agrawal said India was working to address regulatory, telecommunications, cloud, data-flow, cybersecurity and other issues that affect fintech companies operating across borders.

India's large domestic market can serve as a testing ground for technologies before they are taken overseas, while FTAs and international partnerships can provide channels to global markets.

“Build in India, but design for the world,” Agrawal said.