India and Singapore have announced to link their payment apps, namely UPI and PayNow which will allow instantaneous and low-cost money transfers between the two countries.
The linkage is set to ease financial transactions for the Indian diaspora.
About the move:
Background: UPI payments through QR codes are already taking place in Singapore, though at a limited number of outlets.
The announcement was done via a virtual address by both India and Singapore’s Prime minister.
Aim: This move will aid the Indian diaspora in Singapore, especially students and migrant workers, by allowing instantaneous and low-cost money transfers between the two countries.
Singapore has now become the first country with which cross-border Person to Person (P2P) payment facilities have been launched.
This will help the Indian diaspora in Singapore and bring the benefits of digitalisation.
It will also help FINTECH through instantaneous and low-cost transfer of money from Singapore to India and vice-versa.
FINTECH or financial technology refers to the technological innovation in the design and delivery of financial services and products.
Unified Payments Interface (UPI):
Unified Payments Interface (UPI) is a system that powers multiple banks accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood.
It also caters to the “Peer to Peer” collection request which can be scheduled and paid as per requirement and convenience.
Currently, UPI payments are made using the digital equivalent of existing currency notes. That means every rupee transferred via UPI is backed by physical currency.
The digital rupee will be legal tender in and of itself and need not necessarily be backed up by physical currency.
The digital rupee/ currency will be operated by RBI and not by bank intermediaries in the case of UPI where each bank has a different UPI handler.
The digital rupee will be settled by RBI instantly, whereas UPI payments are settled by transacting banks with RBI.