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India’s UPI Takes a Significant Step Towards Globalization

In our recent column, we discussed how Google Pay has defied expectations in India—a key fintech battleground where American tech and credit card giants have struggled to gain a foothold. Google Pay maintains an impressive 35% share of the critical United Payments Interface (UPI) market in India, while competitors like WhatsApp Pay and Amazon Pay lag far behind with less than 1%, and PayPal is nowhere to be seen.

Despite facing fierce competition from domestic players such as Walmart-backed PhonePe and local fintech powerhouse Paytm, and dealing with accusations of monopolistic behavior due to its dominant app store, Google has largely managed to steer clear of regulatory issues in India. This is because, in the intricate Indian fintech landscape, Google has successfully navigated the balance of thinking globally while acting locally.

Against this backdrop, Google’s decision to collaborate with UPI on its international expansion seems like a savvy move. This partnership not only aligns with a significant policy goal of the Indian government but also opens up new avenues for growth for Google Pay.

A Strategic Partnership

On January 17, Google India Digital Services Pvt. and the National Payments Corporation of India, the entity behind UPI, inked an agreement to extend UPI’s reach beyond Indian borders. The goal is twofold: to facilitate easier payments for Indian travelers abroad and to lay the groundwork for UPI-inspired payment systems in other nations. “This aligns with NPCI’s mission to strengthen India’s standing in the global digital payments arena,” UPI stated, adding that the partnership will also simplify remittances by reducing reliance on traditional money transfer methods.

By aligning itself with UPI, Google is not only positioning itself for new digital finance opportunities but is also signaling to the Indian government that it is a valuable ally in New Delhi’s efforts to globalize the UPI system—a goal that Prime Minister Narendra Modi has personally championed. For example, during the BRICS summit in August 2023, Modi highlighted UPI’s expansion to countries like the UAE, Singapore, and France, noting, “There are numerous possibilities to explore this with BRICS nations as well.”

In the same month, Modi told India’s Business Today that 46% of global digital payment transactions currently occur in India, a statistic he described as “a shining example of our policy success,” adding that “the world now views India as a hub of innovation.”

The remittances angle is also crucial. A recent World Bank report highlighted that India’s remittance inflows reached $125 billion in 2023—the highest globally, far surpassing Mexico and China. The annual growth rate was a strong 12.4%.

In March 2023, NPCI signed an agreement with Singapore’s PayNow to enable cross-border real-time money transfers. The Monetary Authority of Singapore estimates that using this payment rail will cut remittance costs between the two countries by 10%.

Learning from Alipay

As UPI gears up for a broader international push, it can draw valuable lessons from the experiences of another Asian fintech giant with global ambitions—China’s Alipay. Alipay was the first major Asian fintech to attempt a global expansion, but its efforts have yielded mixed results for several reasons.

Firstly, although Alipay never explicitly stated its intentions, its aggressive acquisition of e-wallets across major Southeast Asian markets hinted at an attempt to create an alternative payment network in the region. However, this strategy proved challenging, as Southeast Asia is not a single market or regulatory environment like China. The realization of such a project may still be years away.

Even regional central bankers might struggle to establish a unified QR code-based payment system, despite their concerted efforts. They do, however, hold the advantage of being the regulatory authorities.

Secondly, Alipay underestimated geopolitical risks, as exemplified by the failed attempt of its parent company Ant Group to acquire MoneyGram in the United States. Although Ant successfully acquired the UK’s WorldFirst in 2019, the deal required the company to shut down its U.S. operations.

In contrast, UPI’s expansion appears to be more strategic and measured. Its growth has first targeted countries that send significant remittances to India, such as the UAE, the U.S., and Singapore, as well as Nepal—a close neighbor and an ideal market to establish a UPI payment system from scratch. If the Nepal initiative proves successful, it could serve as a model for other emerging markets.

Lastly, having Google as a partner bodes well for UPI. Few tech companies possess Google’s unparalleled combination of resources, capital, technology, and brand power. This partnership could be a game-changer in UPI’s quest to extend its reach beyond India and elevate Indian fintech to the global stage.

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