The Indian economy is fast embracing digitization. According to a recent report, in July 2022, India’s instant real-time payment system, the Unified Payments Interface (UPI), registered 6.28 billion transactions and is expected to reach $440.3 billion at a CAGR of 14.80% by 2032.

The modern-age payment system enables users to send and receive payments instantly via smartphones. More and more merchants have started collaborating with payment aggregators to integrate UPI payment gateways.

Now India is gearing up to take UPI global to make it a universally used and accepted mode of payment. In this blog, let’s understand more about UPI and its global expansion.

What is UPI

Unified Payments Interface (UPI) is a single-window mobile payment system developed by the National Payments Corporation of India (NPCI). It enables multiple bank accounts, from participating banks, into a single mobile application. It merges several banking features, merchant payments & seamless fund routing under one umbrella eliminating the need to enter bank details or other sensitive information each time a customer initiates a transaction.

Regulated by the Reserve Bank of India (RBI), the Indian central bank, the Unified Payment Interface is a real-time payment system. It works by transferring money between two bank accounts along with a mobile platform, just in a two-click factor authentication process.

UPI Goes Global

As UPI emerges as the most preferred payment mode with a market share of 64% of merchant payments in the first quarter of 2022, The RBI and NPCI are now working towards expanding the reach of the UPI globally.

While UAE, Japan, the US, Singapore, Bhutan, Nepal, and France already accept UPI-based payment services, India is expanding in the UK market, starting with QR code-based transactions. With this, the UK will be the eighth country where UPI-based services will be made available.

How Does UPI Global Work?

To expand the deployment of UPI and Rupay solutions outside India, the Reserve Bank of India (RBI) and NPCI launched NIPL as the latter’s subsidiary in 2020. The international subsidiary has been forging partnerships with banks and payment providers to expand NPCI’s digital payment products to boost the growth of the Indian digital payments ecosystem in the international market. It would also include payment service providers (PSPs) and global merchant acquirers, among many others.

For tourists or migrants, it is mandatory to have a bank account in India with UPI enabled on it. The users must also have a BHIM application to make any UPI payments. As a result, Indians traveling to distant locations with Indian bank accounts can transact easily in a foreign land without worrying about carrying a Forex card or the local currency and be able to make UPI payments at shops, retail establishments, and other merchants.

The Future of UPI Global

India’s innovative Unified Payments Interface has revolutionized the payments industry in the country. According to NPCI, the value of 6.28 billion transactions was worth Rs 10.63 trillion in July 2022, up by 7.16 percent compared to June 2022. Also, the number of Indian banks live on the UPI network was 338 as of July 2022, as per the report. At such a point, it does not seem surprising that UPI is flourishing as one of the trending payment platforms in the international market.

Now, as businesses also choose to accept UPI payments through payment links, QR codes, or web/app payment gateway integrations, at Mobileware Technologies, we work with some of India’s leading partners, including private banks and small finance banks, to simplify business payments. Through our hosted UPI switch with connectivity to NPCI and personal Virtual Payment Address (VPA), QR Code generation, customer management, PSP application, and a gamut of other services, we are successfully offering interoperable and scalable payment solutions to the ecosystem.

Over the last few years, Buy Now Pay Later (BNPL) is steadily gaining popularity. Indian Buy Now Pay later market grew at a CAGR of ~321 % by Gross merchandise value (total value of the loans disbursed to consumers), during FY’19-FY’21. The popularity of BNPL grew during the pandemic when we saw a significant rise in the eCommerce industry.

In India, BNPL is a payment option wherein you can sign up with a company providing this service to pay on your behalf. Then, within a stipulated time, you have to repay the amount. No interest is levied on the same. There are two options. You can either pay it as a lump sum or with no-cost EMIs.

However, if you fail to make the repayment, the lender will charge you interest on your amount, and your credit score will get impacted.

How does BNPL work?

The operational model is usually the same for different BNPL service providers, barring some terms and conditions.

Here’s the primary mechanism:

1. Make a purchase
2. Opt for the Buy Now, Pay Later option
3. Make a small down payment
4. The remaining amount is deducted through interest-free EMIs.

BNPL is different from purchasing with a credit card. BNPL usually doesn’t charge fees or interest. But they have a fixed repayment schedule. What you need to pay per week or month is decided in advance. Also, not all purchases are eligible for BNPL.

In the BNPL model, once the payment is made, businesses receive 100% payment upfront while the customer repays the same to the provider, one installment at a time.

Benefits of BNPL

The BNPL scheme benefits both the businessman as well the customer. Let’s go over some advantages of using this payment method for both vendors and customers-

1. Instant payment received:For vendors, BNPL is a boon. They get paid instantly whether or not the customer pays their installments. This also means that the BNPL providers take all the risks and protect business owners and vendors from fraud and financial loss.
2. Reach more customers:BNPL options are more popular with the younger generation. According to reports, more than 26% of millennials and almost 11% of Gen-Z shoppers used BNPL services for their recent purchases. By providing different payment options, reaching out to a larger audience becomes easy.
3. Increase in conversions: By allowing customers to make payments over time, they get the joy of buying the product instantly, without going through the sticker shock that comes with the price tag. Generally, audiences are more likely to purchase if they can pay for it in installments.
4. Better customer experience:Most BNPL providers don’t have a hard check for financing. Customers get an efficient and more convenient way of registering with them. There is no application, no additional fees, and no extra processing time. Customers can check out in a few steps with ease.

Bottom line

The idea behind BNPL is to let customers immediately get what they want, with a little extra time to pay for them.

Note: In June 2022, RBI issued guidelines that would impact the BNPL model. It stated that nonbanks can no longer load prepaid instruments — digital wallets, or stored-value cards — using credit lines. The RBI said that the only valid options for a buyer are to prefill their wallet with cash or to debit their bank or credit card accounts. RBI also clarified that the BNPL model needs to be examined and guidelines need to be framed for the new scheme in the lending domain.

While this might slow down the growth of BNPL, the story is far from over. We are excited to witness BNPL’s immense potential!

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