China and India are widely expected to be two of the most powerful global players in the decades to come. In some ways, they are alike. As Techdirt has reported, both have dismal records when it comes to Internet freedom, online censorship and privacy. But they differ in terms of their impact on the IT sector outside their home countries. China has produced a worldwide success story in TikTok, alongside well-known Internet giants such as Alibaba, Baidu and Tencent. India, by contrast, is chiefly famous in the computing world for its vast digital biometric identity system, Aadhaar. That may be about to change, thanks to another Indian creation, the Unified Payments Interface (UPI).
As its rather boring name suggests, UPI is a way of allowing all the different payment systems and companies that make up India’s financial sector to interoperate seamlessly. In practice, this means that Indians can send money to more or less anyone, or any company, in India, with a few clicks on a UPI mobile phone app without worrying about the details. An article from 2017 on Medium provides an excellent detailed history of the project up to that time. A post on the Rest of the World brings the story up to date:
UPI, introduced in 2016, has surpassed the use of credit and debit cards in India. Nearly 260 million Indians use UPI — in January 2023, it recorded about 8 billion transactions worth nearly $200 billion. The transactions can be facilitated using mobile numbers or QR codes, ranging from a few cents to 100,000 rupees ($1,221) a day.
At the heart of UPI lies Aadhaar:
Users without debit cards can use a UPI address — similar to an email address — to transfer money from their Aadhaar-linked bank accounts in real time. Over the past decade, the government has used Aadhaar as a building block for a host of digital services, such as payments, e-signatures, and health apps; these interlinked sets of digital platforms are called India Stack.
UPI is clearly a big success in India, not least for providing poorer sectors of society with advanced financial services via their mobile phone. But the real story may be the one developing outside India:
India has partnered with banks and payment companies in countries including the U.S., the U.K., Singapore, Saudi Arabia, Oman, and the UAE to make UPI available to the Indian diaspora or Indian tourists.
That makes sense, because India is one of the largest remittance recipients in the world, receiving around $100 billion in 2022. But there’s another key aspect:
India’s federal bank has been pushing for the internationalization of UPI since 2020. One of the reasons for this aggressive global expansion is to mitigate geopolitical risk. In February 2022, the U.S. and its Western allies blocked Russian banks’ access to Swift, an international payments system used by thousands of financial institutions, hurting Russia severely. It spooked other countries about secondary sanctions — especially India, which continues to purchase crude oil from Russia.
A global roll-out of UPI would obviously be great news for Russia, offering a way to circumvent the ban on using Swift that was imposed following its invasion of Ukraine. It would also bolster India’s geopolitical power, since it controls the underlying UPI technology, and it would place Indian companies at the heart of this emerging international payments system. UPI may have a dull name and low visibility currently. But behind the scenes the implications of its wider adoption outside India could be dramatic, and just as influential as China’s more obvious approach to bolstering its soft power in the online world.
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