MC EXCLUSIVE India-UK trade deal to give UPI a bigger play in Britain, ease remittances

PM Narendra Modi signed the trade deal with UK PM Keir Starmer on July 24.

India and the United Kingdom have through the recently inked free trade agreement (FTA) agreed to let people in both countries use each other’s fast payment systems, enabling quick money transfers and QR code payments, further internationalising the Unified Payment Interface (UPI).

Indians travelling to the UK will be able to make payments using their UPI account from their phone without the need to carry the pound sterling in their wallets.

Similarly, a resident in Britain can directly send money digitally to India to their parents and relatives and vice versa.

The provision is included in the ANNEX 9A of the Comprehensive Economic and Trade Agreement (CETA), signed on July 24, between Britain and India under the “Schedules of Specific Commitments on Financial Services”.

“Access to respective Fast Payment Systems (FPS) on a reciprocal basis, without a need to get onboarded onto the other payment system, through interlinking of FPS for: (i) QR code-based merchant payments, and (ii) instant fund transfers,” it says.

Seamless cross-border payments

This access is applicable for cross-border payments, consumption abroad, for entities with commercial presence as well as for any natural persons residing in either the UK or India.

This is a major leap in seamless cross-border digital transactions, enabling users in India and the UK to make real-time payments to merchants and transfer funds internationally, using their familiar local banking or payment apps, said Nitesh Singhal, founder of fintech consultancy Aryaa Advisors.

“It significantly improves user convenience, lowers transaction costs, and facilitates faster trade and remittance flows,” Singhal, who previously headed UPI at Axis Bank, added.

He said the move is in line with India’s efforts to integrate UPI with real-time payment systems in countries such as Singapore and the UAE, enabling direct transfers without the need for multiple intermediaries or currency conversions

This will further ease flow of remittances from India’s third largest source, the UK, whose share in remittances into India grew to nearly 11 percent in 2023-24 against 3 percent in 2016-17.

It could also indirectly boost tourism. Around 18.8 million Indians visited the UK in 2024, with a total expenditure of $28.31 billion, the British government estimates.

The arrangement is likely to be implemented once the FTA is operational, which may take up to a year as the ratification processes in Britain is lengthy.

In 2022, NPCI International Payments Limited (NIPL), a wholly-owned subsidiary of UPI parent National Payments Corporation of India (NPCI), signed a memorandum of understanding to make Indian payment solutions available in the UK on all PayXpert’s Android point-of-sale (POS) devices for in-store payments, starting with UPI-based QR code payments and later integrating the possibility for RuPay card payments.

But the arrangement brokered through the FTA is different as well as broader in nature.

The Indian government has not held discussions with the central bank or NPCI on the nature of the partnership or the implementation, sources said.

India has similar agreements with the UAE and Singapore to enable such payments and remittances. These are countries with a large Indian diaspora and voluminous money transfers every year.

When a British citizen or resident will use a banking or payments app and scan a UPI QR code in India, the payment will pass through the NPCI network, which will settle it with the similar payments body in the UK.  The final details could vary once the system is in place.

To be sure, merchant outlets in the UK have terminals that accept card payments more than QR-based real-time payment systems, which could restrict the possibility of widespread usage of UPI.

“Everyone wants to develop a UPI-like fast payment system and also tie up with UPI for seamless international real-time payments. But this is likely to take up a few years before this becomes a possibility on the ground,” said a senior banking official.

In October, India and the UAE governments announced that they were now working on interlinking the two national payment platforms – UPI and AANI,  which would facilitate seamless cross-border transactions.

Allowing cross-border bill payments is part of India's larger digital payment push that has gained momentum especially during the course of its G20 presidency in 2023.

Advancing financial inclusion globally through technology and digital public infrastructure was a key pillar of India's G20 agenda.