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Nepal to become the first country to adopt India's UPI system

  • Category
    Economy
  • Published
    24th Feb, 2022

Context

Nepal is set to be the first country to adopt India's UPI system, which will play a pivotal role in transforming the digital economy of the neighbouring country.

Key-highlights

  • NPCI International Payments Ltd (NIPL), the international arm of NPCI, has joined hands with Gateway Payments Service (GPS) and Manam Infotech to provide the services in Nepal.
  • GPS is the authorised payment system operatorin Nepal and Manam Infotech will deploy Unified Payments Interface (UPI) in that country.
  • In June, 2021, Bhutan became the first country, in India’s immediate neighbourhood, to use the BHIM app for mobile-based payments and “to adopt UPI standards for its QR deployment”.
  • BHIM UPI, the Indian government’s digital payment app, was launched in Bhutan.

What is Unified Payments Interface (UPI)?

In 2021, UPI enabled 3,900 crore financial transactions valuing USD 940 billion, which is equivalent to approximately 31 per cent of India’s GDP.

  • UPI is amongst the most successful real-time payments (RTP) systems globally, providing – simplicity, safety, and security in P2P and P2M transactions in India.
  • Unified Payments Interface (UPI) is an immediate real-time payment system that helps in instantly transferring the funds between the two bank accounts through a mobile platform.
  • Hence, UPI is a concept that allows multiple bank accounts to get into a single mobile application.
  • This idea was developed by the National Payments Corporation of India and is controlled by the RBI and IBA (Indian Bank Association).
    • NPCI is the firm that handles RuPay payments infrastructure, i.e. similar to Visa and MasterCard.
    • It allows different banks to interconnect and transfer funds.
      • Immediate Payments Service (IMPS) is also an initiative of NPCI. UPI is considered as the advanced version of IMPS.
    • UPI service has created a significant positive impact in India in terms of the country’s digital payment transformation.

UPI ID & UPI PIN

  • UPI ID: A UPI ID is a unique identification for a bank account that can be used to send and receive funds.
  • UPI PIN: UPI PIN is a 4-digit personal identification number that must be entered to authorise the transfer of money via UPI. The PIN can be chosen by the account holder.

Transact365 Brings Cross-Border Payments to India

  • In January, U.K.-based FinTech Transact365 added cross-border payments for merchants to and from India to its suite of services through two local solutions: Unified Payments Interface (UPI), a real-time payments system that allows inter-bank, peer-to-peer (P2P) and person-to-merchant transactions through mobile devices; and NetBanking, which uses the Transact365 gateway and completes the transaction in real time using the local currency.
  • Transact365 also launched local payment distribution, which allows merchants to pay their clients in India in real time with application programming interface (API) connectivity.

Significance of the development

  • The collaboration will serve the larger digital public good in Nepal and bolster interoperable real-time person-to-person (P2P) and person-to-merchant (P2M) transactions in the neighbouring country.
  • This collaboration will enable the last-mile consumers in Nepal to reap the benefits of an open interoperable payments system driving immediate payment transfers between bank accounts and merchant payments in real-time.
  • Nepal has a population of about 30 million (3 crore) with around 45 per cent banked.
  • Mobile penetration of over 135 per cent with 65 per cent of the population using smartphones provides a bedrock for seamless replication of the digital revolution in India to be replicated in Nepal.
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