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India, Singapore link systems for real-time cross-border cash transfers

The Unified Payments Interface takes an important stride forward – as does India's soft power tech push

India's use of government-created tech to expand its sphere of influence advanced yesterday, when Singapore agreed to link the Unified Payments Interface (UPI) to its own PayNow scheme – enabling real-time cross-border payments between the two nations.

UPI is a peer-to-peer or peer-to-merchant scheme that transfers money between bank accounts in real time. PayNow does likewise, using a mobile phone number as the identifier.

Both schemes were designed for use within their source nation's borders.

But yesterday Indian prime minister Narendra Modi and Singapore PM Lee Hsien Loong announced interoperability between the schemes, meaning residents in either country can make cross-border payments in real time – provided they hold accounts with participating banks.

News of the two schemes intertwining is about more than just convenience, or the boost to the nations' digital economies both leaderss enthused about at the launch.

The announcement is also a demonstration of India using government-developed software to extend its regional influence.

India created UPI to meet a domestic need for faster payments – and to bring more people out of the cash economy and within reach of tax authorities.

UPI operates at enormous scale – the scheme processed over eight billion transactions in January 2023 alone.

UPI is also an expression of India's belief in digital public goods – software that performs a useful function that India needs, and operates at sufficient scale that it represents a counterweight to commercial services that might otherwise dominate markets.

Open source software fills a similar role in other fields. Big software companies put energy into Linux to ensure commercial operating systems face robust competition so the likes of Microsoft can't accrue too much influence.

In July 2022 India bundled several of its digital public goods into a project called IndiaStack, which it offered to other governments free of charge.

IndiaStack is about building influence, according to Baani Grewal, an analyst at the Australian Strategic Policy Institute where she leads strategic engagement with South Asia and focuses on India.

"The Indian government wants to export a governance model that is separate from China, the EU, and the United States," she told The Register.

"And it helps India to have South Asian countries be part of its payment system, or to show that Europe or Australia are adopting India's digital models."

Adoption of UPI abroad also plays well at home, Grewal said, as Indian travellers perceive their government having achieved widespread influence.

Other travellers can also get a taste of UPI. The scheme has previously required participants to hold a bank account in India, but early in February India's Reserve Bank announced that eligible visitors from G20 countries will be allowed to create "Prepaid Payment Instruments" – wallets linked to UPI for making payments at Indian merchants that accept the scheme.

The choice of G20 nations is no accident: India is the current chair of the bloc and will host many meetings, and many thousands of influential visitors, during the year. Many may go home with a positive UPI story to share.

The Singapore/India UPI deal may also mean that the Indian scheme's brand starts to appear at points of sale – just like Alibaba's AliPay has done around the world.

Singapore's status as a regional financial service hub will also give UPI a fine shop window.

Perhaps the bilateral deal may also make life a little harder for another cross-border payments contender: blockchain. After all, who needs to go through all the pain of building new payment systems, and reassuring users there's no taint from cryptocurrency and other fintech flops, when governments already have the systems to make cross-border money movements happen? ®

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