‘India’s UPI could link with select US banks for fast payments’

India’s Unified Payments Interface (UPI) could be linked with select private banks in the United States to expedite payment processes, Christopher Waller, member of the Federal Reserve Board of Governors of the United States, said on August 28, at the Global Fintech Fest in Mumbai.

He complimented India’s payments revolution, noting that a well-executed partnership between the public and private sectors has helped set up a digital infrastructure for financial transactions in this country.

“I spent three to four hours yesterday at the NPCI and learned a lot about UPI and how it is done,” Waller said at the event, about the National Payments Corporation of India, which developed and manages UPI.

Integrating UPI into the United States banking system would, however, not be easy, he noted.

“We do not have enough banks connected to make a full service product, but we have some private banks which can connect to UPI. We first need to build a compelling value proposition for such an integration,” said Waller.

Compliance protocol and risk management diktats that have been implemented to check crimes such as money laundering, fraud detection and terror financing are reasons why most banks in the US are not connected to a fast payments service system.

“Slowing down the speed, at which payments are cleared and settled, helps banks prevent money laundering and counter the financing of terrorism, detect fraud and recover fraudulent or misdirected cross-border payments,” Waller pointed out. More than the technology itself, Waller said sorting out the legality and nitty-gritties of governance would be bigger challenges. “Linking technology is the easiest part,” he said.

Waller noted that in India the private sector had utilised the foundation built by the public sector to enhance payment systems while observing regulatory requirements.

“Building on the foundation laid by the public sector, innovators in the private sector seize the opportunity to enhance payments through the introduction of new capabilities that will alleviate frictions while remaining within regulatory guardrails,” Waller observed about the successful digital transaction story of India.

Well-planned interlinking arrangements between banks of different countries would be significant for the mechanism of cross-border payments to be successful, he said.

“Interlinking arrangements would allow banks in different countries, who are users of domestic fast payment systems, to send payments to each other through technical connections between their respective domestic payment systems,” he said, adding that the G20 blueprint is aimed at tackling problems in cross-border payments.

The UPI is a real-time payment system launched in 2016, which allows instant money transfer from one bank account to another using mobile devices. Today, 300 banks process more than 10 billion transactions every month in India using the technology.