Gurleen Kaur
UPI is revolutionising cross-border payments, expanding India’s digital payment influence through global integration, regulatory reforms and strategic partnerships. The introduction of the Unified Payments Interface (UPI) in 2016 marked a transformative shift in India’s digital payments landscape. Designed for speed, interoperability and user-friendliness, UPI has become the backbone of India’s payment ecosystem. While its domestic success is widely acknowledged, its growing role in cross-border payments is an emerging frontier with immense potential for international remittances and global commerce. The Unified Payments Interface (UPI) has revolutionized the digital payments market in India in ways that have outpaced many seasoned banking systems, especially when compared to the banking system in the United States. Established by the National Payments Corporation of India (NPCI) in 2016, UPI is a real-time, instant payment system that allows users to transfer money between bank accounts using multiple mobile apps. Since 2016, the impact of UPI on the Indian economy has been profound, as it has greatly simplified business-to-consumer, business-to-business and peer-to-peer payments, promoting digital inclusion while reducing dependency on cash. Before UPI, India’s payment ecosystem was heavily reliant on cash, which accounted for more than 90 percent of transactions. UPI changed the game by offering an easy-to-use, free and fast way for users to make digital payments. It brought together the convenience of mobile apps with the security of bank accounts, allowing users to make instant transfers across multiple banks 24/7. The key to UPI’s triumph lies in its interoperability and speed. Unlike traditional banking systems, wherein interbank transfers could take hours or even days to process (especially during weekends or holidays), UPI enables the immediate transfer of funds with just a phone number or UPI ID. Furthermore, it integrates with various third-party applications such as Google Pay, PhonePe, Paytm and others, ensuring the user experience remains seamless, user-friendly and favourably accessible. UPI has also evolved to include features like recurring payments, bill splitting and QR code-based transactions, which have been crucial for its widespread adoption.
Since its inception in 2016, UPI has redefined the landscape of digital payments in India, demonstrating how simplicity and scalability can catalyse systemic transformation. By integrating diverse banking services into a unified, smartphone-enabled platform, UPI has not only streamlined financial transactions but also demonstrated the network effects of user-friendly design. By the end of 2024, UPI’s transaction volume had surged to a remarkable 17,221 crore, contributing to India’s overall payment volume of 20,787 crore—a testament to its intuitive interface, immediate settlement mechanisms and seamless interoperability across financial institutions.
India on it’s Data Localisation Laws
The first version of a data protection law to be introduced before Parliament was the Personal Data Protection Bill of 2019, which allowed ‘sensitive’ personal data to be transferred outside India based on meeting adequacy requirements while simultaneously mandating that ‘critical’ personal data be processed only in India. The stringent conditions on the transfer of non-sensitive personal data were eased as compared to the 2018 version of the bill. However, the Personal Data Protection Bill 2019 was withdrawn by the government, and in November 2022, the Digital Personal Data Protection Bill of 2022 was circulated for public consultation.The 2022 bill abandoned the classification between different types of data and instead proposed a ‘whitelist approach,’ where the Union government would notify the countries or territories to which personal data may be transferred. Apart from the whitelisted countries, there was a ban on cross-border data transfers. Finally, the Data Protection Act, 2023, flipped the whitelist approach on its head and adopted a ‘blacklist’ approach where cross-border data transfers are allowed, except to the countries which have been restricted through a Union government notification.Apart from the data localization mandated by data protection laws, India also has sectoral laws restricting the transfer of various types of data outside Indian territories. For instance, in 2018, the Reserve Bank of India mandated that all licensed banks and payment system providers must store data relating to payment systems only in India.
The concept of data sovereignty, especially through localization,thus results in two broad harms that cannot be justified by any aims at boosting domestic industry capacities. First, it hinders the booming information economy and subjects India to the risk of huge economic losses by halting cross-border data transfers. International trade in services cannot flourish without the free flow of data. Second, India is clearly inching towards a surveillance regime where it aims to use localized data to enforce laws and protect state interests. The threat of state surveillance, already implemented through other avenues such as Rule 22 of the Draft Rules, is exacerbated by data localization. India therefore ought to understand the thin line between data sovereignty and state surveillance.
India’s stance on its UPI diplomacy
India’s diplomatic strategy has increasingly intertwined with its economic policy, particularly in financial technology. Recognising the global potential of the payments system, NPCI is now actively working to export these transformative payments systems. The objective is to enhance India’s position as a trusted partner in digital finance, with several countries expressing interest in adopting the payments system. These include Japan, United Arab Emirates, Singapore, Bhutan, France, Mauritius, Sri Lanka and the Maldives, all of which aim to modernise their financial systems. Nepal’s adoption of UPI as the first country to integrate the system outside India exemplifies its global appeal. India’s efforts to promote it internationally represent a significant step toward technological diplomacy. By aiding other nations in implementing the system, India can emerge as a global leader in scalable and secure digital payment solutions. For instance, the recent introduction of the payments system in the Maldives, following an agreement signed during external affairs minister S Jaishankar’s visit, highlights how UPI can deepen economic ties and strengthen India’s image as a reliable innovation partner. More significantly, UPI is currently operational in seven countries, allowing Indian travellers and Non-Resident Indians to use the platform for merchant payments. These countries include Sri Lanka, Mauritius, France (at select merchants), the United Arab Emirates, Singapore, Bhutan, and Nepal. Additionally, the UPI-PayNow linkage has been implemented between India and Singapore, enabling Person to Person (P2P) remittances between the two nations.
In a move that is in keeping with the strengthening of ties between India and France, India’s Unified Payments Interface (UPI) system can now be used in the European nation, beginning with the Eiffel Tower in Paris. UPI already has linkages with payment systems in several countries across the world in India’s immediate neighbourhood, West Asia and Southeast Asia; France is the first European nation to adopt it. After the launch, Prime Minister Narendra Modi expressed his enthusiasm on social media platform X, stating, “Great to see this – it marks a significant step towards taking UPI global. This is a wonderful example of encouraging digital payments and fostering stronger ties.” This sentiment reflects the broader vision of making UPI a global standard for digital transactions. The National Payments Corporation of India (NPCI) has announced that tourists visiting the Eiffel Tower can now book their tickets using UPI payments. This collaboration with the French e-commerce and payments platform Lyra facilitates seamless transactions, making it easier for Indian tourists, who constitute the second largest group of international visitors to the Eiffel Tower, to purchase tickets online through a simple QR code scan.
This foundational technology is reshaping how identity, consent, and value are managed in the digital economy, from safeguarding transactions to enabling new economic models. However, with its growing role comes increasing complexity, particularly in terms of integration, regulation and the architecture of future payment flows. The traditional view of tokenization as a fraud mitigation tool is outdated. While still central to security, modern tokenisation addresses broader demands: interoperability across platforms, reduced operational costs, and improved customer experience. This shift is especially visible in the adoption of network tokenization—a model introduced by major card networks like Visa, Mastercard and the UPI where card details are replaced with dynamic, network managed tokens.
In parallel, India’s national spyware industry has grown, driven by both government demand and global private sector opportunities. Indian companies are developing a range of surveillance and monitoring tools, catering to the needs of law enforcement agencies and private clients. Indian law enforcement and intelligence agencies also rely on domestically developed spyware for various purposes, including criminal investigation, counterterrorism, and maintaining public order. The cyber-related private sector in India also appears to have been used for digital intelligence against foreign targets. India’s first National Cyber Security Policy (NCSP) was formulated in 2013. This was the first dedicated policy document providing general measures protecting cyberspace from state and non-state threats and ensuring information infrastructure security. The policy outlined strategic objectives, guiding principles, and specific actions to enhance India’s cybersecurity posture. The primary objectives of the NCSP were securing cyberspace by safeguarding critical information infrastructure, reducing the vulnerabilities of information and communications technology by implementing robust cybersecurity measures, promoting public-private partnerships and international cooperation, and spreading awareness about cybersecurity across all sectors of society.
Is the UPI paving the path for India’s future in the global cyber space?
The collaboration between India and ASEAN to enhance digital payment systems represented a key opportunity for economic growth and integration powered by India’s UPI system. While the potential is vast—addressing trade, e-commerce and remittances, there is the ever-present risk that interconnected systems, no matter how promising, are fraught with fragility. The transfer of knowledge and technology has transcended simple economic development, emerging as a strategic diplomatic tool. India’s achievements in digital public infrastructure have fuelled positive shifts in its own economy, and now, the objective is to extend this model, assisting other nations along the way.
The governments of India and the UAE are now collaborating to connect their respective national payment platforms, UPI and AANI (UAE) to enable seamless cross-border transactions. This integration will empower over 3 million Indians living in the UAE to use both UPI and AANI for real-time cross-border remittances, aligning with the goal of enhancing speed, transparency, accessibility and cost-effectiveness in international money transfers. Expanding such a similar service across ASEAN could reduce financial strain on migrant workers and ensure that more funds reach their families faster, creating a subtle but impactful shift in remittance dynamics.
The National Payments Corporation of India (NPCI) has also signed a strategic agreement with the Ministry of Digital Transformation (MDT) of Trinidad and Tobago to develop a real-time payments platform modelled after India’s Unified Payments Interface (UPI) to make seamless bank transactions through mobile devices. This makes Trinidad and Tobago the first Caribbean nation to implement a system similar to UPI. The objective of this collaboration, as per documents, is to establish an efficient platform for person-to-person (P2P) and person-to-merchant (P2M) transactions, aimed at enhancing the digital payment landscape and promoting financial inclusion in the Caribbean country. This partnership, while building on the existing ties between India and Trinidad and Tobago, will modernize Trinidad and Tobago’s financial ecosystem, increasing accessibility and connectivity with both domestic and international payment networks. The rollout of this new system is expected to take place by late 2026 or early 2027. Working silently in the background, avoiding large-scale noise, promotion and self-praise, the NPCI is actively expanding UPI’s global influence through its international arm, NPCI International Payments Limited (NIPL). As a part of this, it is focusing on infrastructure development and interoperability with Indian payment systems, helping other nations build their digital payment frameworks. NIPL aims to share India’s technological advancements in digital payments while providing foreign entities with the expertise required to establish their own sovereign digital payment ecosystems. By broadening UPI’s footprint, which is also seen as a part of soft diplomacy, India is not only strengthening these ties but also gaining strategic advantages, enhancing its economic influence and securing new markets for its technology.
By integrating diverse banking services into a unified, smartphone-enabled platform, UPI has not only streamlined financial transactions but also demonstrated the network effects of user-friendly design. This success is not confined to India. The UPI-PayNow linkage, operational since 2023, has enabled real-time cross-border transactions between India and Singapore, marking a pivotal step in operationalising financial interconnectedness. India’s instant real-time payment system is gaining global acceptance. Such bilateral successes are now expanding into multilateral frameworks, with the Reserve Bank of India (RBI) collaborating with the Bank for International Settlements (BIS) and the central banks of Malaysia, the Philippines, Singapore, and Thailand on Project Nexus. Set to launch by 2026, this initiative aims to interlink fast payment systems (FPS) across these nations, creating a cohesive infrastructure for retail cross-border payments. As these collaborations progress, it’s crucial to look beyond the surface and understand which sectors will truly benefit. These initiatives aren’t isolated tech upgrades; they’re part of a web of global interactions. The impact will ripple across power structures, trade and supply chains. The central inquiry is not merely which sectors gain but how these benefits unfold or fail to materialise within an interconnected and volatile global landscape.
Despite its potential, exporting UPI faces challenges. Developed markets like Japan have well-established financial systems, requiring India to demonstrate unique advantages. Strategic collaborations, coupled with policy support and infrastructure subsidies, will be crucial for overcoming these hurdles. Another significant challenge is ensuring data protection and cybersecurity. With rising transaction volumes, maintaining user trust through robust safeguards for personal and financial information is paramount. India’s ongoing digital transformation, marked by increasingly widespread internet penetration and digital technology adoption across various sectors, has made the country an increasingly attractive target in cyberspace. The threat landscape encompasses both state and non-state actors. India is not unique in this respect, given the recent global rise in cyber threats. Nonetheless, as an increasingly large and increasingly digitized economy, India is a bigger target than many.Notwithstanding the more operational aspects of India’s cyber statecraft, India advocates for a rules-based international order in cyberspace, emphasizing principles such as the peaceful use of cyberspace, respect for sovereignty, and non-interference in the internal affairs of states. India’s cyber diplomacy appears therefore to be situated in the mainstream of global efforts to promote responsible state behaviour and prevent the militarization of cyberspace. One former senior Indian diplomat, Ambassador Asoke Mukerji, who played a significant part in coordinating India’s cyber diplomacy dialogues, has even advocated for a more binding international cyber agreement.This opinion is an outlier: it is more common for India’s cyber-diplomatic positions to reflect specific national interests. For example, India has emphasized the importance of trusted supply chains in cyber diplomacy forums, indicating the high national security priority of this issue in light of bilateral tensions with China. Similarly, in its cyber-related activities under the auspices of the Quad, India is pursuing enhancements of its domestic cyber security capacity and not engaging with other Quad members on more controversial issues of potential diplomatic disagreement.
Promoting UPI as a case study in Indian training and management institutions could also enhance its global acceptance, offering valuable insights to international policymakers and businesses. As NPCI explores partnerships to expand UPI’s reach, the groundwork is laid for a new era in global digital transactions. By addressing challenges and highlighting its unique strengths, UPI has the potential to become a global phenomenon, showcasing India’s technological leadership and bolstering its economic and diplomatic influence.
India actively participates in a wide variety of international forums and initiatives aimed at shaping global cyber governance norms. This includes engagement via organizations like the United Nations and the International Telecommunication Union, and partnerships such as the Shanghai Cooperation Organisation (SCO) and BRICS. However, bilateral tensions between India and other member states (China in BRICS, and both China and Pakistan in the SCO) render these organizations implausible as vehicles for substantive cybersecurity cooperation.
India’s cyber diplomacy is thus seen to provoke a surprisingly wide range of different views, from plaudits for its active engagement and broadening of global representation in cyber diplomacy to criticism of its past administrative disorganization and “largely non-committal” relationship with the norms of cyber diplomacy. One reason for this seeming inconsistency is probably the fact that cyber diplomacy is but one tool of a wider cyber statecraft. It is genuinely difficult to appraise the effectiveness of any single tool when the contours of the full agenda are (potentially by design) somewhat blurry.
India is not regarded as a global top-tier cyber power.It has even been described as a “muddling cyber-power.”But assessment of India’s cyber power is made difficult by the lack of open-source information about its capabilities and operations or of publicly available cyber doctrine explaining the principles behind their use. Nonetheless, it is clear that cyber threat actors engaged in intelligence collection, and assessed as having a possible Indian connection without any evidence of a governmental affiliation have become more numerous, more capable and more diverse in their targeting over the past decade. There is very little public visibility regarding India’s capabilities in cyberspace but absence of evidence is not necessarily evidence of absence.
Conclusion
UPI has already transformed India’s domestic payments landscape and its growing role in cross-border transactions marks the next frontier. By leveraging regulatory reforms, technological innovations and strategic partnerships, India is poised to enhance the efficiency and affordability of global payments. As more countries integrate with UPI, the vision of a seamless, interoperable and cost-effective global payment system becomes increasingly tangible. The payments industry must recognise and adapt to this paradigm shift, ensuring that the future of cross border transactions is faster, more inclusive and digitally driven.
Traditional cross border payments are bogged down by intermediaries, inflating costs and delays. UPI side steps these with real time settlements, reducing transaction times from days to seconds. This efficiency lowers financial barriers, enabling businesses to trade with greater agility. Digital payments are also seen to improve liquidity. Small businesses can pay immediately upon receiving goods, strengthening trade relationships. By cutting out intermediaries, these systems free up resources letting companies focus on what matters—core operations, without the drag of outdated payment processes
The comprehensive trade facilitation measures collectively contribute to India’s vision of emerging as a “Vishwa Mitra” (partner to the world) and align with the country’s 2047 development goals. These reforms are designed to enhance market access, strengthen regulatory cooperation, and boost competitiveness across various sectors. The emphasis on digital transformation and process simplification positions India favorably in the evolving global trade landscape. The reforms particularly benefit exporters of high-value, perishable, or time-sensitive goods through reduced cargo dwell time and simplified customs compliance. The jewelry sector, for instance, benefits from discussions regarding the designation of the Indian Jewellery Exposition Center in Dubai as a Designated Zone under the India-UAE CEPA. Similarly, the pharmaceutical sector gains from expedited registration processes and pricing mechanisms. India’s trade facilitation reforms represent a comprehensive approach to modernizing the country’s international commerce infrastructure. The combination of digital transformation through ICEGATE 2.0, cost reduction measures such as transhipment fee waivers, and enhanced customs processes creates a more efficient and competitive trade environment. These initiatives, coupled with strategic international partnerships and ongoing FTA negotiations, position India advantageously in the global trade ecosystem.
The reforms demonstrate the government’s understanding that contemporary trade success requires not only policy reforms but also technological advancement and international cooperation. The focus on reducing transaction costs, minimizing cargo dwell time, and improving user experience addresses fundamental challenges faced by Indian exporters and importers. As these measures continue to be implemented and refined, they are expected to contribute significantly to India’s goal of becoming a major global manufacturing and export hub while supporting the broader objectives of economic growth and international competitiveness.
What emerges next? How global and regional supply chains adapt and how diplomacy follows will be a fascinating byproduct of this shift.
References
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