International Numbers On UPI May Solve Domestic Spending Pains For NRIs
Non-resident Indians in 10 countries will be able to link their international phone numbers with UPI after April 30.
India’s United Payments Interface could gain over 1.5 crore potential users by the end of April. This is a result of the National Payments Corp. of India’s decision to allow non-resident Indians to link UPI to their international phone numbers.
While non-residents can only use UPI with local phone numbers under current rules, the change will allow the linking of non-resident external and non-resident ordinary accounts with international phone numbers for UPI payments, according to a Jan. 11 circular from NPCI.
Both of these are domestic accounts, but non-resident (external) accounts are used to park foreign income, whereas non-resident ordinary accounts are for domestic income earned by NRIs. Both accounts allow only rupee-denominated deposits.
The move solves a domestic spending bottleneck for NRIs, since they were able to use debit cards for such accounts but not UPI. The linkage will allow users to both pay merchants with UPI and pay each other.
Merchant transactions accounted for 53% of UPI transactions by volume in December 2022, according to NPCI data. In value terms, P2P transactions accounted for 77% of the same month.
UPI registered a transaction volume of 7.8 billion in December 2022 for transactions amounting to Rs 12.8 lakh crore, according to NPCI data.
Allowing the linkage of international phone numbers could also make remitting money easier for non-residents, according to Jaikrishnan G, head of financial services consulting at Grant Thornton Bharat.
"A typical NRI in the Middle East remits about 80% of their income. This would make an immediate option available to them," he said, comparing the process of remitting through international money transfer providers.
To be sure, money would need to be transferred from an NRI's bank account in the country they are working into their NRE or NRO account in an Indian bank before it can be used for UPI transactions.
Given that such transactions would essentially be domestic in nature, they will also be free of cost. NPCI’s circular said that all members participating in UPI should comply with the changes by April 30.
The body also detailed an initial list of 10 countries, including the U.A.E, Singapore, the U.S., and Hong Kong, for which this change will enable international numbers on UPI.
About 1.66 crore non-resident Indians live in these countries, according to data from the Ministry of External Affairs.
The April deadline is primarily for banks to allow the registration process for this feature, Vishwas Patel, chairman of the Payments Council of India, told BQ Prime.
"Implementing the change to support international mobile numbers will require quite a lot of work, but it should be doable by April 30," said Sameer Nigam, chief executive at PhonePe.
PhonePe and other UPI apps currently accept only Indian mobile numbers.
"The UPI circular is enabling NRE or NRO accounts to use UPI for domestic Indian payments," he said. "International remittances are not being addressed right now."
A tricky part of this implementation will also be whether NPCI expects banks or payment application providers to coordinate with international telecom operators for services such as short message service. If such coordination is required, it will also raise the project's complexity and, obviously, the associated costs, Nigam said.
Exporting UPI
On multiple occasions in the past, NPCI has stated its intentions to expand the reach of UPI across geographies. In the middle of last year, it also signed a Memorandum of Understanding to bring parts of UPI to France. A similar arrangement has also been made in the United Kingdom.
"The interest is incredibly high," Nigam said, referring to other countries’ inclination to implement a payment system such as UPI. NPCI has to figure out a model to license the technology globally, he said.