UPI can do more tricks among BRICS

Narendra Modi's call for India to set up UPI integration for cross-border digital payment days before New Delhi hosts the BRICS Summit is no coincidence. It is, indeed, leading discussions within the bloc. Separately, bilateral negotiations with member countries like Brazil offer greater promise. Remittances across BRICS vary with India, China and Brazil seeing significant net outflows, while Russia and South Africa serve as economic hubs for migrant workers and report net outflows. India tops the global remittances league table and, of course, stands to gain most by bypassing expensive international fund transfer networks. But the gains will be for all BRICS members if they can get their virtual payments networks to talk to each other. This fits into the larger theme of plans to expand engagement in local currencies within the bloc.

There are some challenges. BRICS member countries run their national payments networks on individual backend systems that do not offer themselves easily to interoperability. Organising handshakes involves mapping identities and setting up a settlement mechanism. BRICS doesn't have institutional capacity to enforce security standards across payments systems of individual countries. Concerns over cross-border data flows pose another set of issues with trust deficit among some members, particularly between China and India. In the absence of a common currency denominator within BRICS, exchange rate fluctuations tend to push up cross-border transaction costs.

None of these challenges is unsurmountable. UPI is a runaway success story internationally, and India's proactivity over interoperable systems is entirely justified. BRICS offers a platform for India to test its economic diplomacy with immediate benefits. The pace of economic integration of the bloc is enviable. Success within the grouping can be translated into bigger multilateral ambitions for UPI. The trick would be to plug UPI into a regional framework using existing financial infrastructure.