April 15, 2024

India’s UPI gets a boost in its quest for globalization

We recently wrote for this column about how GoogleGOOG Pay has defied the odds in India, a crucial fintech market where both US tech and credit card giants have struggled to gain a foothold. The Google Pay app continues to have around 35% market share on leading local payments platform United Payments Interface (UPI) in India, while WhatsApp Pay and AmazonAMZN Pay each have less than 1% and PayPalPYPL is absent entirely .

While Google has aggressive domestic competitors in the Indian payments space, such as WalmartWMT-backed PhonePe and local fintech giant Paytm, and has been accused of monopolistic practices given its app store dominance, the giant American technology company has largely avoided regulatory problems on the subcontinent. This is because in the Indian fintech market, Google is a global company that usually manages to continue thinking locally.

With this in mind, its decision to partner with UPI on the international expansion of the Indian payments railway seems like a shrewd move that could support an important policy goal of the Indian government and offer Google Pay new growth opportunities.

A strategic alliance

On January 17, Google India Digital Services Pvt. Limited. and the National Payments Corporation of India, creator of UPI, signed an agreement to expand UPI services beyond India. The partnership aims to make payments outside India convenient for Indian travelers and pave the way for UPI-inspired payment systems in other countries. “This is aligned with NPCI’s effort to strengthen India’s position in the global digital payments landscape,” UPI said in a statement, adding that the agreement will also support simplification of remittances by reducing dependence on channels conventional money transfer.

By partnering with UPI, Google is not only creating new digital finance opportunities for itself, it is also signaling to the Indian government that it is an important partner in New Delhi’s push to globalize the local payments system, something the Prime Minister Narendra Modi has done it personally. defended. For example, at the BRICS summit in August 2023, Modi noted that UPI has expanded to countries such as the United Arab Emirates, Singapore and France. “There are many possibilities to work on this also with the BRICS countries,” he said.

Also in August, Modi told India’s Business Today that 46% of global digital payment transactions today take place in India, which he described as “a shining example of the success of our policies”, adding that “the world Today he sees India as the incubator of innovation.”

The remittance angle is also important. In a recent report, the World Bank noted that India’s remittance flows reached $125 billion in 2023, the highest in the world and far ahead of second-ranked Mexico and third-ranked China. Annual growth was a vigorous 12.4%.

In March 2023, NPCI signed an agreement with Singapore’s PayNow to facilitate real-time cross-border money transfers. The Monetary Authority of Singapore estimates that using this payment method would reduce the costs of remittances between the two countries by 10%.

Learning from Alipay

As UPI prepares to accelerate international expansion, there are important lessons it can learn from another Asian fintech giant with ambitions to grow abroad. In fact, China’s Alipay was the first major Asian fintech to try to gain a global foothold, an effort that has had mixed results for several reasons.

First, Alipay never explicitly said it, but its spate of strategic e-wallet acquisitions in every major Southeast Asian market suggested the Chinese company wanted to build an alternative payments avenue for the region. The problem with that strategy is that Southeast Asia is not a market or regulatory regime like Alipay’s local market in China. A project like this could take many years to come to fruition.

Even the region’s central bankers may not be able to create a regional payments system based on QR codes, although they are working hard to achieve it. They have the advantage of being the ones who make regulatory decisions.

Second, Alipay underestimated the geopolitical risk, which is best summed up by its parent company Ant Group’s failed bid to acquire MoneyGram in the United States. Although Ant later successfully acquired the U.K.’s WorldFirst in 2019, that company had to close its U.S. operations for the deal to go through.

So far, UPI appears to be expanding in a more strategic and calculated way than Alipay. The expansion has occurred first in countries that send the most remittances to India, such as the United Arab Emirates, the US and Singapore, as well as in Nepal, a close neighbor of India and a suitable market to try build a UPI payment gateway from scratch. . If Nepal’s expansion is successful, it could serve as a model for other emerging markets.

Finally, having Google as a partner bodes well for UPI. Very few technology companies have Google’s world-leading combination of resources, capital, technology and brand power. We hope this partnership can prove instrumental in UPI’s efforts to put down roots outside its home country and take Indian fintech global.

Follow me in Twitter or LinkedIn. Verify My Web site.

Leave a Reply

Your email address will not be published. Required fields are marked *