UPI International Linkage

UPI International Linkage refers to the extension of India’s Unified Payments Interface (UPI) beyond national borders to enable cross-border digital payments. This initiative allows Indian users to make merchant payments and, in some cases, person-to-person transfers in foreign countries using UPI-enabled applications, while foreign users may also be enabled to transact within India through linked systems. The internationalisation of UPI represents a significant milestone in India’s digital payments journey, with far-reaching implications for banking systems, financial services, and the Indian economy as a whole.

Background and Evolution of UPI Internationalisation

UPI was originally developed as a domestic real-time retail payment system by the National Payments Corporation of India to promote interoperable, instant, and low-cost digital transactions. Following its widespread domestic adoption, policymakers and regulators recognised its potential as a global payment platform, particularly for countries with large Indian diaspora populations and strong trade or tourism linkages with India.
The concept of UPI International Linkage emerged as part of India’s broader strategy to export digital public infrastructure and strengthen cross-border payment connectivity. Pilot implementations began with select countries, focusing primarily on merchant payments for Indian travellers, before expanding towards broader interoperability with foreign fast payment systems.

Regulatory and Institutional Framework

The international deployment of UPI operates under the regulatory oversight of the Reserve Bank of India, in coordination with foreign central banks and payment authorities. NPCI International Payments Limited (NIPL), a subsidiary of NPCI, plays a key operational role in forging partnerships, ensuring compliance with international standards, and managing settlement arrangements.
Regulatory considerations include foreign exchange management, anti-money laundering (AML) norms, know-your-customer (KYC) requirements, and data localisation policies. UPI International Linkage is designed to comply with both Indian regulations and host country payment laws, ensuring that cross-border transactions remain secure, transparent, and legally sound.

Operational Mechanism of UPI International Linkage

Under UPI International Linkage, Indian users can make payments abroad using their existing UPI applications linked to Indian bank accounts. Transactions are typically denominated in the local currency of the host country, with real-time or near-real-time currency conversion and settlement handled through authorised banking channels.
The payment flow involves coordination between Indian banks, foreign acquiring banks, payment networks, and settlement institutions. Despite the cross-border nature of the transaction, the user experience remains similar to domestic UPI payments, preserving simplicity and ease of use while masking underlying complexities such as foreign exchange conversion and cross-jurisdictional settlement.

Role in the Banking Sector

For Indian banks, UPI International Linkage expands the scope of retail payment services and strengthens their global footprint. Banks gain access to new transaction volumes generated by outbound travel, overseas education, medical tourism, and international commerce. This diversification of payment flows supports fee-based income and enhances customer engagement with digital banking platforms.
The linkage also reduces reliance on traditional international payment instruments such as cards and wire transfers, which are often costlier and slower. By integrating UPI with international systems, banks can offer competitive alternatives that align with global trends towards instant payments.

Impact on Financial Services and Cross-Border Payments

Cross-border payments have historically been associated with high costs, delays, and lack of transparency. UPI International Linkage addresses these inefficiencies by leveraging real-time payment infrastructure and simplified user authentication. Financial service providers, including fintech companies, benefit from the ability to design innovative cross-border products such as low-value remittances, travel payments, and small merchant transactions.
The linkage also complements existing remittance channels by offering a digital, app-based option that is particularly attractive for retail users. Over time, this may exert downward pressure on transaction costs in the international payments market, enhancing competition and consumer welfare.

Significance for the Indian Economy

At the macroeconomic level, UPI International Linkage supports India’s integration into the global digital economy. It facilitates smoother payment experiences for Indian tourists, students, and professionals abroad, while also encouraging inbound spending by foreign visitors familiar with interoperable payment systems.
The initiative strengthens India’s position as a provider of digital public goods and enhances its soft power in the global financial landscape. By promoting UPI as a scalable and inclusive payment model, India contributes to the development of efficient payment systems in partner countries, fostering economic cooperation and regional integration.

Advantages and Economic Benefits

The international expansion of UPI offers several advantages:

• Lower Transaction Costs: Reduced dependence on card networks and intermediaries lowers fees for users and merchants.
• Speed and Efficiency: Faster settlement improves liquidity and transaction certainty.
• Financial Inclusion: Simplified digital payments support access for small merchants and individuals.
• Global Recognition of Indian Infrastructure: Enhances trust and acceptance of Indian digital systems worldwide.