In a major effort to disrupt the over $1 billion in annual cross-border transactions between India and Singapore, the two countries are working to link their digital payment systems to enable “instant, low-cost fund transfers.”
The project to link India’s Unified Payments Interface (UPI) and Singapore’s PayNow is expected to be operational by July 2022, according to both countries’ central banks. Users on either platform will be able to send money to each other without having to sign up for the other, according to the banks.
“When implemented, fund transfers can be made from India to Singapore using mobile phone numbers, and from Singapore to India using UPI virtual payment addresses (VPA). The experience of making a PayNow transfer to a UPI VPA will be similar to that of a domestic transfer to a PayNow VPA,” Singapore’s Monetary Authority stated in a press release.
UPI, a five-year-old payments infrastructure developed by a group of retail banks, has become one of the most popular ways for Indians to send money to each other and to businesses.
The railroads, which have been adopted by a slew of local and global companies like Google and Facebook, now process over 3 billion transactions per month. Singapore’s PayNow, like UPI, enables interoperability between banks and payment apps, allowing users to make transactions on other payment apps.
According to a report released earlier this year by Citi, nearly 250 million people around the world send over $500 billion in cross-border remittances each year.
However, the market is ripe for disruption. “The fees are extremely high. It is embarrassing that we have not solved this issue so far,” wrote Citi analysts. The global average cost of sending money is approximately 6.5 percent. The RBI and the MAS have not disclosed the cross-border fees that they will charge their customers.
The project is a “significant milestone in the development of infrastructure for cross-border payments” between India and Singapore, according to India’s central bank, and it “closely aligns with the G20’s financial inclusion priorities of driving faster, cheaper, and more transparent cross-border payments.”
“The linkage builds upon the earlier efforts of NPCI International Private Limited (NIPL) and Network for Electronic Transfers (NETS) to foster cross-border interoperability of payments using cards and QR codes, between India and Singapore and will further anchor trade, travel and remittance flows between the two countries.”
In April 2021, Singapore and Thailand signed a similar agreement to allow users in both countries to send money using the recipient’s mobile number. The collaboration used PayNow and PromptPay, two peer-to-peer payment systems in each country, as part of a regional payment initiative to make cross-border payments easier.
Singapore also announced earlier this month that it is developing and testing a common platform for processing cross-border digital payments with the central banks of Australia, Malaysia, and South Africa. The goal of the pilot project to use central bank digital currencies (CBDCs) for international transactions was to eliminate the need for intermediaries and, as a result, reduce transaction time and cost.