5 Reasons, Why Can’t UPI Be Used for Cross-Border Payments?

The Unified Payments Interface (UPI) has revolutionized digital payments in India, making transactions faster, cheaper, and more accessible. However, its application for cross-border payments is still in its infancy. This article explores the challenges that UPI faces in becoming a global payment system and the initiatives underway to facilitate its expansion into international markets.

Current Challenges for UPI in Cross-Border Payments

1. Transaction Limits

One of the primary limitations of UPI is its strict transaction limits. Currently, UPI caps most payments at INR 1 lakh (approximately $1,200). This restriction poses a significant challenge for larger international transactions, which often exceed this amount, particularly in business-to-business (B2B) scenarios.

2. Limited Currency Support

UPI primarily operates within the Indian financial ecosystem, which limits its ability to handle multiple currencies. Cross-border payments typically require support for various currencies, and UPI is not yet equipped to facilitate these exchanges seamlessly. This limitation hinders its usability for international transactions.

3. Need for Partnerships

For UPI to effectively facilitate cross-border payments, the National Payments Corporation of India (NPCI) must establish partnerships with financial institutions in other countries. This involves navigating complex regulatory environments and building relationships, which can be time-consuming and challenging. Without these partnerships, UPI cannot expand its reach beyond India.

4. Dispute Resolution Challenges

The immediate nature of UPI transactions complicates dispute resolution. In international payments, resolving issues related to transaction errors or fraud can be particularly difficult due to the involvement of foreign regulations and the speed at which transactions occur. This complexity can deter users from adopting UPI for cross-border transactions.

5. Regulatory Compliance

Cross-border transactions must adhere to diverse regulatory frameworks across different jurisdictions. This complexity poses significant challenges for UPI’s integration into international payment systems, as compliance with various laws and regulations is crucial.

Initiatives to Establish UPI as a Global Payment System

Despite these challenges, several significant initiatives are underway to establish UPI as a global payment system:

1. International Partnerships

The NPCI is actively forming partnerships with various countries to enable UPI transactions abroad. Notable collaborations include:

• Singapore: The UPI-PayNow linkage allows seamless fund transfers between India and Singapore, enabling users to send money using mobile numbers and make payments to merchants in Singapore using UPI apps.
• France, Sri Lanka, and Mauritius: UPI has recently launched in these countries, allowing Indian travelers to make payments in local currencies without incurring foreign exchange charges.

These partnerships aim to enhance the usability of UPI for both peer-to-peer and merchant transactions internationally.

2. Government and RBI Initiatives

The Indian government and the Reserve Bank of India (RBI) are actively promoting UPI’s global outreach. The RBI’s Payments Vision Document 2025 emphasizes the internationalization of UPI and RuPay cards as a key objective. This includes:

• Collaborating with central banks and financial institutions globally to facilitate UPI’s acceptance in more countries.
• Supporting initiatives that promote the use of UPI for remittances, particularly in regions with high Indian expatriate populations, such as the UAE and the US.

3. Integration with Global Payment Systems

India is working with international payment networks like SWIFT to enable UPI transactions in foreign currencies. This integration aims to simplify cross-border payments and make UPI as accessible internationally as it is domestically.

4. Technological Enhancements

The NPCI is continuously upgrading UPI’s infrastructure to support higher transaction volumes and enhance security features. This ensures that UPI meets international standards for digital payments, making it more appealing for global use.

5. Expanding Merchant Acceptance

Efforts are underway to increase the number of merchants accepting UPI payments abroad. This includes outreach to businesses in countries where Indian tourists frequently visit, ensuring that they can use UPI seamlessly for transactions.

Alternative Solutions for Cross-Border Payments

While UPI’s expansion into cross-border payments is on the horizon, businesses and individuals currently have alternative solutions for international payments, including:

• Traditional Banking Channels: Wire transfers, SWIFT, and correspondent banking are common methods for cross-border payments, although they can be slower and more expensive.
• Fintech Solutions: Services like BRISKPE offer faster, cheaper, and more user-friendly alternatives to traditional banking for cross-border payments.
• Digital Wallets and Mobile Money: Platforms like PayPal, Skrill, and Neteller enable online payments across borders, providing additional options for users.

Conclusion

The expansion of UPI into cross-border payments is a work in progress, with significant challenges related to widespread adoption. However, the ongoing initiatives by the Indian government and NPCI demonstrate a strong commitment to making UPI a viable option for international transactions. As these efforts continue, UPI could revolutionize the way we conduct cross-border payments, making them faster, cheaper, and more accessible for users around the world.