International Payments Across Three Generations

As the Indian trio of a father and his two children enter the Souk Al Arsah in Dubai, they greet a swamp of locals and tourists in the oldest UAE marketplace. The father’s eyes catch the glimmer of pearls and jewellery shops. The younger son whiffed at the air filled with perfume, traditional incense, and a hint of spices. The elder daughter’s interest rested in the UAE ethnic dresses—abayas and kandooras. The market is alive with vendors shouting prices, customers haggling for better deals, families laughing, and, in some corners, children crying over dropped ice cream. The trio swept in with the flow and joined the bargaining war over a set of copper coffee pots. The vendor,  after a hard bargain, forfeited for 24 AED. The elder daughter scans the QR code for UPI and pays the amount. The awed father remembers the old days of travelling. He had to convert INR to AED beforehand and calculate the budget. In this conversion, the banks always benefit. He had to buy at a price higher than the exchange and sell at a lower price. On the other hand, VISA and MasterCard international cards have high convenience fees. The recent developments in UPI and technologies have eased these transactions.

The father, awed by the technology, started a monologue to his children. He began with how UPI is a real-time payment system that allows users to link multiple bank accounts to a single smartphone app. They can make fund transfers without providing an IFSC code or account number. The National Payments Corporation of India (NPCI) developed UPI. In 2017, the Indian government launched a RuPay credit card to solve the problem of not having a credit or debit card. RuPay expanded the customer base and allowed for further expansion in market share. In 2019, UPI RuPay captured 58% of the Indian market share, competing with the earlier dominance of VISA and Mastercard.

The younger son questioned her sisters about how UPI works. She patiently answered his queries, explaining how UPI works. She said, “The sender scans the UPI code, which sends the credentials to the server, connecting it with the sender bank. After the transaction confirmation, the server requests that the bank deduct the amount from the client’s account. The app receives a confirmation message. Instantly, the receiving party credentials are verified and connected to the receiver’s bank to add the amount. Both parties involved receive a completion message. International UPI works in the presence of an acquiring bank in a foreign country. The payment gets routed via the domestic payment pipe. The system would then talk to the Indian system UPI and get routed to the Indian bank via the UPI network and then to the customer’s account. The settlement of the transaction would happen in the reverse order.”

The trio makes another stop for garments and scans the code again. The son, as if now realising the difference in currency, squeaks his question. The sister explains that conversion takes place on the server according to real-time conversion rates. The father further expands that UPI charges a fixed transfer fee and a percentage varying from 0.1 to 2 of the amount transferred. The cap limit on transfers is at Rs. 2 lakh. The transfer percentage is lower than the direct competitors, VISA and Mastercard, making it attractive to users.

For the first time, the sister asks why foreign countries are willing to use UPI. The son prompts, UPI is fast, and they like India! The father laughs at his innocent answer and corrects it. With the Russia-Ukraine War, other geopolitical events, and the failure of another US bank, the countries have learned that the USA has monopolistic power over the use of the dollar and its value. Their trust in the dollar has dwindled. They fear instant sanctions by the USA to burden their country’s economies. As they explored new options, India showcased the ease of UPI at the G20 meeting. It allowed them to experience transactions smoothly, build interoperability, and initiate a discussion over the international use of UPI by partnering with their banks. NPCI International also helps other countries to create UPI-like ecosystems. They work with central banks or central bank-authorised entities to formulate propositions. It encourages other countries to collaborate and allow international use of UPI.

They shopped for a few more hours and kept their goods tucked under their arms, bags over their shoulders, and some snacks to nibble as they walked. The father looks at his son and remembers the news headline about BRICS inviting six new members, UAE being one of them. He recalls the article about the BRICS plans to form the BRICS currency to float in the member countries. It is a long-term plan as it has to go through various steps to be accepted and regulated. But he is excited to see if his son in the future pays in a new currency, like the establishment of Euro, for the goods they bought today.