India Advocates for Streamlined Compliance to Boost UPI's Global Reach

India is urging the Financial Action Task Force to ease compliance requirements for cross-border transactions conducted through its Unified Payments Interface . This initiative aims to facilitate the use of UPI by Indian travelers abroad and enhance competition in the global payments market.

Introduced in 2016, UPI has revolutionized India's digital payment landscape, accounting for 83% of the nation's digital payment volume in 2024, a significant rise from 34% in 2019. In 2024 alone, UPI processed over 208.5 billion digital payment transactions. The system's rapid adoption is attributed to its user-friendly interface and the increasing penetration of smartphones across the country.

Despite its domestic success, UPI's expansion into cross-border transactions faces challenges due to stringent compliance regulations imposed by international financial watchdogs like the FATF. These regulations are designed to prevent money laundering and terrorist financing but can inadvertently hinder the growth of innovative payment systems. Indian officials have raised these concerns during discussions at FATF conferences, advocating for technology-neutral regulations that would accommodate systems like UPI without compromising on security standards.

The FATF is currently conducting a public consultation on its "travel rule," which mandates the collection and sharing of specific information during cross-border transactions. India's proposal seeks to simplify these requirements for UPI transactions, arguing that the platform's robust security features and transparent transaction trails align with the FATF's objectives. The outcome of this consultation will depend on the consensus among FATF member countries.

In parallel with these efforts, India has established agreements with several countries, including France and Singapore, to accept UPI payments. These partnerships enable Indian travelers to use UPI for transactions abroad, promoting the platform's international acceptance and providing a convenient payment method for the Indian diaspora.

The push for easing compliance requirements is also seen as a strategic move to position UPI as a formidable competitor to established global payment networks such as Visa, Mastercard, and SWIFT. By reducing regulatory hurdles, India aims to offer a cost-effective and efficient alternative for cross-border payments, potentially reshaping the dynamics of the international payments landscape.

However, this initiative has elicited mixed reactions from industry experts and stakeholders. Proponents argue that streamlining compliance will foster innovation and inclusivity in the global payments ecosystem. They highlight UPI's success in promoting financial inclusion within India and suggest that its international expansion could replicate these benefits on a larger scale.

Critics, on the other hand, caution against diluting compliance standards, emphasizing the importance of stringent regulations in safeguarding against financial crimes. They stress that any relaxation of compliance measures should not compromise the integrity and security of the global financial system.