The Reserve Bank of India, on Tuesday, announced a pact with its Singaporean counterpart, the Monetary Authority of Singapore, to link their respective fast payment systems. As part of the agreement, India's Unified Payments Interface (UPI) will be linked to Singapore's PayNow. According to the RBI communique, this linkage is targeted for operationalisation by July 2022. This development can totally change the way money is sent abroad or remitted in India.

CNBC-TV18’s Latha Venkatesh spoke to G Padmanabhan, former non-executive chairman at Bank of India, and Ananth Narayan, professor at SPJIMR, to discuss whether this fast payment system is going to be that easy.

Padmanabhan said, “The way we need to look at this is that today in the UPI space, for instance, we can send money anywhere in India. The same ease with which we are able to do this, we will be able to send money outside also. So, your question on how long it will take, I think for the first proof of the concept, which is going to be Singapore, I think that it will take time till June to iron out issues because one additional factor that needs to be built into this scheme is that this country still has exchange control. So, some of these remittances will have to be captured for the purpose of control monitoring also.”

“But I think all those things will be taken care of to make sure that your payment, either for your merchant or for your peer-to-peer transfer, the ease with which you are able to use the UPI in India, with the same ease you will be able to do these transactions with Singapore. Once we are clear about how these things work, I think expanding this to the other countries will just be a matter of time,” he mentioned.

On common UPI for US and UK, Padmanabhan said, “Some background work needs to be done so that the two systems talk to each other, that becomes critical. I think, in terms of the cost of the payments, the cross-border transactions have been quite expensive and for a long time, the central banks around the world have been talking about how to link their systems to make sure that this is made faster, cheaper, and we all know that when central banks are behind it, the finality of the settlement also happens. I agree that possibly we are able to start off in Singapore much quickly because Singapore has a system which is the same, like our UPI. It will take some time but once this corridor concept has been established, I think very quickly, it will get scaled up because, for the systems to be talking to each other, as long as they have a robust retail payment system anywhere in the world, I think it is a matter of time.”

Narayan said, “This is almost like a WhatsApp moment for ISD and STD in the telecom business. Both for domestic funds transfer as well as international transfers, banks still are getting a lot of cream. Domestic transfers are all going away, thanks to NEFT, RTGs, UPI, etc. I think there are a couple of reasons why costs will come down. One is this entire point about fund transfer costs, costs and service charges. Given that UPI and Pay Now in the case of India-Singapore will take over the funds transfer situation, banks will have very little local standby to charge any fund transfer fees now, and frankly, the fees has come down, the actual cost has come down dramatically.”

For entire discussion, watch this video.

Also Read: India, Singapore to link UPI and PayNow for “instant, low-cost fund transfers”

(Edited by : Dipika)