UPI, India's epic odyssey continues

India is pushing ahead with the export of its wildly successful Unified Payments Interface (UPI). Greece has become the 10th country to plug into the instant digital payment system, which allows Indian tourists and the diaspora to use it for QR-based payments and to remit money to India. Offering UPI to other countries showcases Indian innovation in the global marketplace. It also allows settlement in local currencies, thus bypassing the dollar-denominated SWIFT gateway. This comes in handy to chip away at the petrodollar energy trade, for instance, with Russia. Making publicly funded open-source digital infrastructure available to the rest of the world establishes India's credentials as a trusted technology partner.

The immediate benefit to India from the cross-border expansion of UPI is reduction in remittance costs. This is a key concern for a nation that receives the highest amount of international remittances. Wire transfers through the SWIFT network route money through several intermediaries that take their individual cuts. UPI settlements are instantaneous, reducing liquidity costs for intermediaries. The system is transparent about exchange rates, and so squeezes out hidden markups in international wire transfers. Since UPI has partner networks, cross-border transfers can be accomplished locally instead of over premium networks.

Countries are rolling out their own digital payment platforms. But India enjoys two key advantages with UPI. One, it has a first-mover advantage in a vital piece of DPI. Two, the network has acquired scale few other countries can aspire to match. US technology majors have presented UPI as a case study for their country's digital payments roadmap. It's reasonable to expect India will be able to press its UPI advantage with more countries. A larger UPI footprint helps to conserve foreign exchange. This is driving GoI's initiative to globalise UPI. Remittances offer a stable source of capital for an economy growing principally due to domestic consumption. It's good for bolstering soft power, too.