.svg)
India’s Unified Payments Interface (UPI) has expanded over the border to Nepal as the country’s national payments operator strikes a deal to deliver its popular instant payment service in the Himalayan country.
Last week, the payment system operators in the two countries joined forces to announce the development of a Nepalese version of India’s highly successful instant payments platform, UPI.
This marks the first time UPI will be adopted in a country outside India, and it is hoped will not be the last time.
“We are confident that this initiative will stand as a testimony to NIPL’s technological capabilities and vision of scaling our unique offerings globally," said Ritesh Shukla, CEO of the National Payments Corporation of India (NPCI) International Payments.
UPI is one of the most successful real-time payments systems in the world, with bigtechs such as Google advocating the adoption of similar services in Canada and the United States.
The platform processed 39bn transactions last year, with a total value of 7.16m crore rupee, or roughly £705bn. This is equivalent to approximately 31 percent of India’s GDP.
By establishing the new service, Nepal hopes to lure more people into the use of financial services.
According to data from the NPCI, the country has a population of around 30m, but only 45 percent of them are banked. This is despite mobile penetration being more than 135 percent, and two-thirds of the population using smartphones.
Policymakers hope the new UPI service will be able to replicate India’s digital revolution in Nepal and reach the unbanked population.
The UPI platform will modernise the country’s digital payment infrastructure, create more opportunities for businesses and enable cross-border real-time P2P remittances between Nepal and India.
The service will be operated by Nepal’s Gateway Payments Service (GPS) and deployed by Indian fintech Manam Infotech.
“The same UPI service has created a significant positive impact in India in terms of the country’s digital payment transformation. We expect UPI in Nepal would play a pivotal role in transforming the digital economy of the country and dreams of building a less-cash society,” said Rajesh Prasad Manandhar, CEO of GPS.
Exporting trend
Although the NPCI hopes to export its UPI beyond the country's borders, competition is fierce. According to VIXIO analysis, more than 70 markets around the world have live or are about to go live with instant payments services. These markets represent more than 90 percent of global GDP.
Historically, payments systems have typically evolved through mainly domestic-based solutions, but over the last decade there has been an increasing trend to export successful real-time payments technology, including both infrastructure and overlay services.
Last month, it was announced that Nexi-owned SIA had won a contract to deliver its instant payments technology, currently used by EBA Clearing for its pan-European SEPA Inst service, to the United Arab Emirates. Another European provider, equensWorldline, had previously won a bid for its instant payments technology in Aruba.
Mastercard-owned Vocalink first exported its IPS solution to Singapore in 2014. Since then it has gone on to win bids in Thailand, the United States, the Philippines, Peru, Canada, Saudi Arabia and several other markets, including the P27 initiative. Mastercard’s purchase of the corporate services business of Nordic-based Nets meant it also acquired the contracts to build and manage instant payments in Hungary, Italy and Slovenia.
The one advantage that UPI will have over these rivals is it is likely to be a very cost effective solution with relatively low barriers to entry. In many respects, it represents a perfect solution for the long tail of smaller markets with limited resources and low financial inclusion. The NPCI may also find the biggest competitive threat to further expanding UPI may not come from the likes of Vocalink and SIA, but from software companies that specialise in low-cost payments infrastructure and solutions, such as the New York-based Montran.
As a solution, however, UPI in India is more of an overlay service that runs on the NPCI’s instant payments infrastructure. As such, rather than simply compete with instant payments solutions in different markets, it can also potentially complement existing national payments infrastructure. For example, Nepal already has an existing instant payments system, which it launched in 2018.
