UPI: The world needs India’s Digital Public Infrastructure, but can’t see the benefit

It is essential for individual proprietors and small businesses that tourists have unrestricted UPI access to fully benefit from India’s visitor economy.

India’s Digital Public Infrastructure (“DPI”) is a domestic success story which its proponents are now seeking to export to other countries, and connect with existing global systems. The difficulties that foreigners in India encounter when using it, however, belie its spirit of inclusivity.

At the G20 Summit this year, DPI was a central focus. At a side event preceding the Delhi leaders’ meeting, G20 Digital Economy Ministers recognised its importance and published the G20 Framework for Systems of Digital Public Infrastructure, later endorsed in the G20 Leaders’ New Delhi Declaration.

India Stack is an international exemplar for DPI, especially the innovations with obvious trans-jurisdictional utility, like Unified Payments Interface (“UPI”). During the side event, German Minister for Digital and Transport Volker Wissing was “fascinated” after he used UPI to pay via QR code at a vegetable market in Bengaluru.

Forty-three other countries have reportedly shown interest in implementing some version of India Stack technology in their societies. The Economist described DPI as “India’s low-cost, software-based version of China’s infrastructure-led Belt and Road Initiative”. This analogy is appropriate, given the effective soft power tool it has become for India. Yet foreign citizens cannot be expected to embrace UPI if they have a negative experience here in India.

UPI Access For G20 Visitors

During the G20, UPI was showcased through the One World framework, which provided Prepaid Payment Instruments (“PPI”) to foreigners from G20 countries. The initial Know-Your-Customer (“KYC”) check had to be performed through a full-fledged money changer like Thomas Cook before they could activate their wallet.

After verification, visitors could load their wallet by exchanging foreign currency in cash or through other approved payment instruments. The initial KYC security processes are obviously vital. Strict guidelines around financial payments are essential to prevent money laundering, terrorism financing and other illicit activities.

But these prepaid wallets hinder the visitors’ full participation in the UPI ecosystem, and the Indian economy. Thomas Cook have confirmed this will continue post-G20, but there is a dearth of advertising around this service.

Hindered By Limited Functionality

However, there is no peer-to-peer (“P2P”) transaction functionality. For example, these PPI wallets only allow payments to merchant QR codes or online portals, resulting in a frustratingly clunky user experience. This disproportionately affects small vendors who use personal codes for payment, such as auto drivers or vegetable sellers.

In these situations, visitors must use cash, but UPI’s ubiquity means change is widely unavailable. Therefore, one often overpays in cash, and has less money to spend elsewhere. The lack of P2P capability makes these prepaid UPI wallets nearly redundant, as most visitors would be able to use their international card at POS terminals or online portals, and would resort to cash with small vendors.

As I have used one myself, I can attest to the frustrating limitations of this solution and at having to either run around looking for change, or overpay. This disincentivises foreign visitors from giving their business to these vendors.

UPI And Tourism

With India seeking to export DPI to other countries, particularly the Global South, it should first ensure its houseguests are properly welcomed. Tourists to India do not only come from G20 countries. Bangladesh, Sri Lanka, Nepal, Malaysia and Singapore are all non-G20 members in the top 10 sources for foreign tourist arrivals in India, collectively representing 29 percent of all foreign tourist arrivals.

The UPI tourist wallets were limited to G20 citizens, only accessible at three airports (Delhi, Mumbai and Bengaluru), and poorly advertised. It was not an open, inclusive, and long-term solution for foreign visitors.

The lack of a sustainable and inclusive UPI solution for visitors could affect the comeback of tourism in India. Tourism contributes $143bn to India’s GDP and is expected to grow to $250bn by 2030. The industry directly employs 88 million people but has a far broader secondary benefit for India’s informal economy.

Across 2017-18, India’s informal economy represented almost 91 percent of employment and 43 percent of gross value added. It is essential for individual proprietors and small businesses that tourists have unrestricted UPI access to fully benefit from India’s visitor economy.

Further, it is beneficial for foreign exchange providers that there is an easily accessible tourist UPI solution. Across this financial year, foreign exchange earnings from tourism in India are predicted to be $30 billion, and this will increase to $56 billion by 2030. A prepaid wallet that foreigners can easily top-up will increase the arbitrage on those funds through payment gateways, and ensure those funds are spent or exchanged before their departure.

India Missing An Outreach Opportunity

Foreigners arriving India should be able to undergo the KYC process and sign-up for a prepaid UPI wallet with full functionality. This will reduce cash dependency, and possible loss, theft, or fraud, increase their injections into the Indian economy, and help them to understand the day-to-day benefits of UPI.

India is strategically positioned between the Global North (who want access to markets) and the Global South (who want financial inclusion) to lead a global DPI revolution. However, the inaccessibility of these systems for visitors shows an inconsistent approach.

The tourist wallets should have full functionality, be available to more than just G20 citizens, and be well advertised at airports, through tourism campaigns and on websites such as Immigration and FRRO.

If India seeks to take DPI global, these limitations need to be addressed, so foreign consumers know its true value, and support its expansion.

Josiah W Neal is a visiting research analyst from Australia at the Takshashila Institution. Views are personal, and do not represent the stance of this publication.