According to World bank data, during 2021, India received $87 billion in remittances, the biggest inflow for any country in the world.
Indians living overseas remitted $87 billion in 2021, the biggest inflow for any country tracked by the World Bank. According to Mr. Ritesh Shukla, CEO, NPCI International Payments Ltd., the remittances market, where it costs $13 on an average to send $200 across borders, is ripe for disruption.
UPI as an Alternative To SWIFT: NPCI plans to take UPI to 3.2 crore NRIs
National Payments Corporation of India (NPCI), developed a Unified Payment Interface (UPI), India’s digital payments system for domestic Peer-to-Peer (P2P) and Person-to-Merchant (P2M) transactions. For domestic transactions, UPI became most successful. Now, NPCI is planning to make UPI less expensive and simpler for cross boarder payment for the 3.2 crore Indians who work in abroad and send money back to home.
UPI displaced cash in India to a large extent and now NPCI is looking for success in cross-border payment. Successful overseas forays by NPCI would give India a home grown alternative to SWIFT, Belgium based cross boarder payment system. NPCI is in the process of connecting the UPI platform to systems in other countries to replicate its domestic success. UPI is continuously increasing its market globally for domestic transactions and adopted by Nepal, Bhutan, Singapore, UAE, France, and Malaysia for domestic Peer-to-Peer (P2P) and Person-to-Merchant (P2M) transactions. Successful cross boarder payment will reduce dependency on SWIFT. India and Singapore are also planning to join hands to link UPI and PayNow.
What is UPI ?
Unified Payments Interface (UPI), developed by NPCI, is a system that powers multiple bank accounts into a single mobile application merging several banking features, seamless fund routing & merchant payments into one hood. The Reserve Bank of India (RBI) established NPCI in order to facilitate quicker, easier, and more affordable retail payments. In order to rapidly transact with vendors and send money between friends or family, a user only requires a virtual payment address. It also caters to the Peer to Peer collect request which can be scheduled and paid as per requirement and convenience.
Features:
Immediate money transfer through mobile device round the clock 24*7 and 365 days.
Single mobile application for accessing different bank accounts.
Two Factor Authentication.
Merchant Payment with Single Application or In-App Payments.
Utility Bill Payments, Over the Counter Payments, QR Code (Scan and Pay) based payments.
Donations, Collections, Disbursements Scalable.
What is SWIFT and what does it do ?
Society for Worldwide Interbank Financial Telecommunication (SWIFT) is the global financial transfer system that allows the smooth and rapid transfer of money across the borders. SWIFT, international payment network is used by banks and other financial systems to quickly, accurately, and securely send and receive information, such as money transfer instruction. SWIFT is based in Belgium and links 11,000 banks and other financial institutions around the world to send secure messages about transfers of money and other transactions.
SWIFT ban against Russia and its Impact on Russian Economy
On February 24 this year, after Russian forces began the invasion of Ukraine, leaders of the EU and US held an emergency meeting to discuss which financial measures should take to punish and discourage Russia’s military assault on Ukraine. One option was the banning Russian banks and financial institutions from SWIFT.
An exclusion from SWIFT means Russian banks could not use it to make or receive payments with foreign financial institutions. The SWIFT ban against Russian banks is one of major the sanctions against Russia imposed by the European Union and US, aims to weakening the Russia's economy. The EU, US, UK said that cutting banks out of SWIFT will ensure that they are disconnected from the international financial system. This was the most potentially crippling financial penalty yet on Russia over its invasion of Ukraine. In the month of March this year, seven Russian banks were removed from Swift. So that, Russian companies may lose access to the smooth and instant transactions provided by SWIFT. Later, more Russian banks were added into this list. Once banks from a country excluded from SWIFT, its interbank payment transactions will become significantly more complex, making payment be only possible in cash.
Russian currency rubble plugged record 30% in the view of SWIFT ban. Meanwhile, Russia's Central Bank raised its key rate from 9.5% to 20% in an attempt to support the rubble. After SWIFT ban, Russia will not get any access to financial markets across the world. The ban would make it harder for Russian companies and individuals to pay for imports and receive amount for exports.
Hence, SWIFT is powerful and only international cross boarder payment system. SWIFT ban against any country, cut off it financially from rest of the world. Country could not make any financial transaction for imports and exports. India's NPCI is in the process of connecting the UPI platform to systems in other countries for cross boarder payment, reducing dependency on SWIFT.
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