Latest / International Business with Fexingo: Global Trade, Cross-Border Deals, and Multinational Operations / How India's UPI Is Reshaping Cross-Border Payments
Transcript
- Lucas: Luna, we talk a lot about supply chains and tariffs, but there's a quieter revolution happening in cross-border payments, and it's being driven by a system most Americans have never used: India's Unified Payments Interface, or UPI. Luna: Right — UPI. I've been seeing those headlines about it expanding into Singapore and the UAE. But for listeners who aren't familiar, what exactly is UPI? Lucas: So UPI is a real-time payment system built by a coalition of Indian banks and the central bank. Think of it as Venmo or Zelle, but on steroids. It's instant, it's free for consumers, and it's interoperable across dozens of banks. Last year, UPI processed over two trillion dollars in transactions. That's roughly seven percent of India's GDP moving through this system every year. Luna: Two trillion — that number is staggering. And now it's going global. What's the latest? Lucas: Just this month, India's central bank signed an agreement with Singapore to link UPI with Singapore's PayNow system. That means a user in India can scan a QR code in Singapore and pay directly from their Indian bank account, with no intermediary, no currency conversion fees, and near-instant settlement. They already have similar arrangements with the UAE and France, and they're in talks with Japan and several Southeast Asian countries. Luna: So this is essentially building a parallel network to SWIFT or Visa for person to person and small business payments. What's the incentive for other countries to sign on? Lucas: For countries with large Indian diaspora populations — like the UAE, where Indians are about thirty percent of the population — it's a no-brainer. Remittances from the UAE to India total nearly twenty billion dollars a year. UPI cuts the cost of sending money home from around five percent to effectively zero. For Singapore, it's about trade and tourism. India is Singapore's third-largest trading partner, and bilateral trade hit thirty-five billion dollars last year. Making payments frictionless greases the wheels. Luna: And for India, it's a soft power play, right? Getting other countries to adopt your payment infrastructure gives you a seat at the table in setting standards. Lucas: Exactly. India is positioning UPI as a global public good, much like how China pushed the Renminbi for international trade. But there's a key difference: UPI is open-source. Any country can adopt the codebase and adapt it. Nepal, Bhutan, and several African nations are already running their own upi based systems. That lowers the barrier to entry and builds an ecosystem around Indian fintech. Luna: Let's talk about the numbers. India's exports of goods and services hit three point five trillion dollars in the latest data, up from three point three five trillion a year ago. Imports also rose to four point four trillion. That growing trade creates a natural demand for efficient payment rails. Lucas: And the trade-weighted dollar index is at 119, up from 118.67 just a few weeks ago. A strong dollar makes dollar-denominated settlement more expensive for countries like India. UPI bypasses the dollar entirely for bilateral payments — it settles in local currencies. That's a huge cost saving for businesses. Luna: You know, Lucas, this conversation reminds me of something. We talk a lot about global trade and cross-border deals on this show, and listeners often tell us these insights help them make better business decisions. If you find value in these conversations, consider supporting the show. It keeps us independent and ad-free. You can buy me a coffee at buymeacoffee dot com slash fexingo. Lucas: Absolutely. Even a small contribution goes a long way in helping us bring you these deep dives. And speaking of deep dives — let's talk about what this means for multinationals. Lucas: For a company like Unilever or a tech firm with operations in India and Southeast Asia, UPI linkage means they can pay suppliers in Indonesia or Singapore directly from their Indian treasury without going through a correspondent bank. That cuts settlement time from days to seconds and reduces currency risk. Luna: And it's not just about cost. It's about resilience. If SWIFT faces disruptions — say from geopolitical tensions — having an alternative payment rail becomes strategically important. Lucas: Right. Look at the headlines today: Iran and the US are playing down hopes for a breakthrough. The Strait of Hormuz is in focus. And oil markets are at 'tank bottoms' in Asia, as Jeff Currie put it. In that environment, supply chains are already under pressure. Any efficiency in the financial layer helps. Luna: And we're also seeing Taiwan's EWT ETF up five and a half percent this week. That's the biggest gain among emerging market ETFs we track. It suggests capital is flowing into Taiwan despite the geopolitical noise. Lucas: Taiwan is a key node in the semiconductor supply chain, and investors are betting that no matter what happens with tariffs or tensions, the island's chip output remains indispensable. But that's a topic for another episode. Back to payments — I think the real test for UPI will be whether it can scale beyond the diaspora corridor into mainstream B2B trade finance. Luna: Are there any hurdles? Regulatory fragmentation, for one. Each country has its own anti-money laundering rules, data localization requirements, and licensing regimes. UPI is a payment system, not a licensed bank. It needs partnerships with local banks to operate. Lucas: That's exactly the challenge. In France, for example, UPI integration is through a partnership with a French bank called Worldline. That works for tourists, but for deep B2B integration, you need more than a QR code at the point of sale. You need integration with enterprise resource planning systems, invoice matching, and so on. India's NPCI — the organization behind UPI — is working on that, but it's early days. Luna: Still, the trajectory is clear. If you look at the growth of UPI in India — from zero in 2016 to over ten billion transactions a month in 2026 — that's a compound annual growth rate that's hard to ignore. Lucas: And it's not just UPI. India is also pushing its RuPay card network globally, and the government has mandated that all new point of sale terminals in India must support UPI. That creates a flywheel effect: more terminals, more usage, more data, better fraud detection. Luna: So for a business listening in, what's the takeaway? If you're importing from India or have a subsidiary there, you should be looking at UPI as a payment option. It could save you two to three percent in transaction fees compared to traditional wire transfers or credit cards. Lucas: And if you're a fintech company, the opportunity is to build on top of UPI. There are already startups offering upi based invoicing, upi based credit, and even upi based cross-border lending. The infrastructure is open, and the user base is massive. Luna: One more thing — the yuan per dollar is at 6.81, up from 6.79. That's a slight depreciation of the yuan. If the yuan weakens further, China's exports become cheaper, which puts pressure on other Asian economies. But UPI gives India a tool to settle trade without relying on the dollar or yuan. Lucas: That's a point worth emphasizing. In a world of currency wars and trade fragmentation, having multiple payment rails is a form of insurance. India is building that insurance policy with UPI. Luna: Alright, let's zoom out. What does this mean for the global payments landscape five years from now? Lucas: I think we'll see a multipolar payment system. Visa and Mastercard will still dominate in the West and in high-value transactions. But for low-value, high-volume payments — remittances, small business payments, e-commerce — UPI and similar systems from China will carve out significant market share. The key variable is interoperability. If UPI and PayNow can link with European or American systems, the network effects could be enormous. Luna: And that's where the geopolitics comes in. The US and Europe are developing their own instant payment systems — FedNow in the US, the European Payments Initiative. But they're late to the game. India has a ten-year head start in real-time payments. Lucas: Right. FedNow launched in 2023, but it's still not widely adopted. UPI has already reached critical mass. So the question is not whether UPI will go global — it already is. The question is whether it can become the default rail for trade between emerging markets. Luna: And that's a fascinating space to watch. Lucas, thanks for unpacking that. Lucas: My pleasure. And for our listeners, if you're interested in the numbers behind UPI's growth, we'll post some links in the show notes. Until next time.