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This month, Payments Post is going global. We’ll jump to Canada as we explore themes from Sibos and then to India to take a look at a leader in next-generation national payment schemes. We’re joined by Cici Northup, Associate Partner in our Global practice, alongside our usual curator Justin Pituch.
Sibos highlights global payment aspirations
This September, payments professionals convened in Toronto for the 2023 installment of Sibos, the annual global financial service summit hosted by Swift. The theme of the conference was “Collaborative finance in a fragmented world,” highlighting topics such as financial inclusion, risk management, and emerging technology.
Of particular note were discussions around ISO 20022 harmonization and the potential for fast payments to improve cross-border payments. The Clearing House’s Richard Dzina spoke about ISO 20022’s promises and its challenges. The standard is potentially transformative in its ability to standardize financial messages worldwide (which we’ve noted would help improve B2B payments and trade) but is implemented on a country-by-country basis with differences between jurisdictions. That’s a bit ironic. Standards are meant to equip stakeholders with a common language, not introduce new differences for them to reconcile. Recognizing this, national bankers and other stakeholders are working together to iron out these differences and to learn from each other as they move forward with ISO 20022 implementation.
Relatedly, Santander’s Fernando Lardiés noted the potential for domestic fast payment schemes to link with one another, speaking to each other with a common language. Domestic payment schemes with a “leg out” could support cross-border transactions to other jurisdictions, either through bilateral or multilateral connections (as proposed by BIS’s Nexus) or through a central multi-country system (we talk more about the various models in a recent Payments on Fire episode). In any case, this seems like an opportunity to improve cross-border payments: national economies benefit from streamlined trade and remittance payments, private sector innovators (including incumbent financial institutions) have an opportunity to leverage open banking to improve consumer experiences, and end users benefit from lower costs and greater predictability. How are these innovations working in practice? For one example, we turn to India.
India’s UPI “goes global”
The National Payments Corporation of India (NPCI) has developed a subsidiary entity, NPCI International Payments Limited (NIPL), for the global deployment of UPI, their fast payments system, among other things. So what is it that they are doing to take UPI “global”? We observe two parallel and related efforts:
- NIPL is making UPI available as a technology stack to other countries for a national fast payments system deployment. Effectively, this is UPI competing as a platform provider with, say, Mastercard’s Vocalink. Nepal is one recent example of a country implementing the UPI stack for its own national purposes.
- NPCI is rapidly implementing bilateral linkages between India’s UPI and other national fast payments systems to facilitate cross-border retail payments. NPCI has built the cross-border functionality necessary to expedite any bilateral connection. The 2022 connection between UPI and Singapore’s PayNow is just one of many examples. Of course, any country that deploys the UPI technology stack for its national fast payment system will find it easier to establish a bilateral connection with India’s UPI system.
And before we move on, readers beware! There is a lot of noise in the public domain that misconstrues these global efforts, often saying that a certain country is “joining” UPI. Please read those articles with caution, as it is often a mischaracterization of one of the two activities described above.
NPCI rigorously builds out domestic UPI capabilities
In parallel with global efforts, NPCI continues to strengthen UPI domestically to support its already ongoing and impressive growth. These domestic capabilities are worth mentioning for two reasons 1) they are generally interesting and 2) we can imagine how capabilities like these extend to support cross-border payments. For example, NPCI recently announced a slew of new products and services, including:
- UPI Lite X, which builds on the existing UPI Lite product that allows a sender to initiate and complete a UPI transaction while offline. The sender preloads funds into a device wallet and can deliver those funds to a UPI-enabled bank account (the receiver has connectivity). UPI Lite X extends this capability, facilitating transactions while both the sender and receiver are offline and have device wallets. The sender preloads funds into a device wallet and can deliver those funds to the receiver’s device wallet, enabled by NFC.
- Hello!UPI which supports voice-enabled payments by app, phone or IoT device, aimed at easing UPI access.
- UPI One World: There has also been significant excitement around UPI One World, a relatively new feature announced earlier this year which allows travelers from G20 nations to use UPI while in India by opening a prepaid wallet with select providers (KYC happens at the time of registration).
- Non-resident access to UPI: Non-resident Indians (Indians living outside of India) can now use Bharat Bill Pay to pay bills (like education expenses or utilities) on behalf of their family, using UPI, and their international phone number.
- The ability to process RuPay credit card transactions. This is particularly interesting to me as it is transforming the types of payment methods that are processed by an account-to-account, national fast payments system. We made note of this development earlier this year and I’d keep my eyes out for how other countries consider this expansion.
It can be overwhelming to track what is happening globally – reach out if you’d like to find out more about what trends and developments we are watching and how they may impact your organization. Until then, we look forward to bringing you a fresh set of news items and insights in November.
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