India and Singapore are working to link their digital payments systems to enable “instant, low-cost fund transfers,” in a major push to disrupt the cross-border transactions between the two nations that amounts to over $1 billion each year.
The project to link India’s Unified Payments Interface (UPI) and Singapore’s PayNow is targeted for operationalization by July 2022, both nation’s central banks said on Tuesday. Users on either of the systems will be able to make transactions to one another without having to sign up to the second platform, the banks added.
“When implemented, fund transfers can be made from India to Singapore using mobile phone numbers, and from Singapore to India using UPI virtual payment addresses (VPA). The experience of making a PayNow transfer to a UPI VPA will be similar to that of a domestic transfer to a PayNow VPA,” said Monetary Authority of Singapore in a press statement.
UPI, a five-year-old payments infrastructure developed by a coalition of retail banks, has become the most popular way users in India transfer money to one another and to businesses.
The system, adopted by scores of local and global firms including Google and Facebook, is now processing over 3 billion transactions each month. Like UPI, Singapore’s PayNow also brings interoperability between banks and payments apps, allowing users from one payment app to make transactions to those on other apps.
Nearly 250 million people across the world send over $500 billion in cross-border remittances annually, a report by Citi said earlier this year. But the space is ripe for disruption. “The fees are extremely high. It is embarrassing that we have not solved this issue so far,” Citi analysts wrote. Global average cost for sending money is around 6.5%. The RBI and the MAS didn’t reveal the cross-border fees that they would charge their users.
India’s central bank described the project as a “significant milestone in the development of infrastructure for cross-border payments” between India and Singapore, and said the linkage “closely aligns with the G20’s financial inclusion priorities of driving faster, cheaper and more transparent cross-border payments.”
“The linkage builds upon the earlier efforts of NPCI International Private Limited (NIPL) and Network for Electronic Transfers (NETS) to foster cross-border interoperability of payments using cards and QR codes, between India and Singapore and will further anchor trade, travel and remittance flows between the two countries.”