Tourism getting a leg-up as Rupay, UPI go global

If you are planning to go abroad for recreation, besides packing the luggage, currency exchange is always on a to-do list and the mark-up charges are an extra burden over your trip charges. This is not really true in case you are going to take a trip to a select few countries.

If the current news is to be believed, then the tourists visiting France or Sri Lanka from India are no longer required to rush for the currency exchange and worry about the mark-up charges.

On July 14, the Prime Minister of India Narendra Modi made an announcement that France has formally agreed to allow the Indian tourists to make UPI payments. This is going to start from that country’s iconic ‘Eiffel Tower.’ Anyone willing to visit the famous spot can book for the tickets in rupees. If properly implemented, it sounds as exciting as it is. Both India and France had been considering this since July 2022 but it was not until the Prime Minister’s visit that the accord was signed.

This was followed by Sri Lanka, whose Prime Minister Ranil Wikremesinghe signed an agreement on July 24 during his visit to India. Some other countries have also enabled the UPI payments beginning July 2021. The list includes Bhutan, Singapore, Malaysia, Nepal, UAE, Oman, UK and BENELUX countries. However, these countries have enabled either RUPAY or UPI payments or Rupee transactions.

Similarly, India has also announced UPI payments for foreign travelers coming to India from February 2023 onwards. To start with, this UPI facility is extended to travellers from G-20 countries arriving at select international airports. The G-20 comprises Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, UK, USA and the European Union. Let’s understand the UPI or more precisely the digital payment system.

A Unified Payments Interface (UPI) is a smartphone application that allows users to transfer money between bank accounts. It is a single-window mobile payment system developed by the National Payments Corporation of India (NPCI). It eliminates the need to enter bank details or other sensitive information each time a customer initiates a transaction. It is regulated by the Reserve Bank of India. NPCI enables international mobile number-linked UPI transactions in countries which agree for such move and so far, 10 countries have agreed to do so.

Thailand and India are working on a mode to link UPI and Thailand’s Prompt pay service.

Other countries are also working to develop similar facilities by taking cue from each other for their citizens, because governance is for the people and for creating newer, helpful opportunities for them. This will open room for digital advancements in the world. It should be implemented by studying all the ‘ifs and buts’ and considering different scenarios. The aim must be to reduce the transaction fees and ensure end-to-end security.

Just as there is a Euro medium of cash across the European Union, the Indian system of rupee payment through UPI can be allowed in all the Asian nations for their tourists. This UPI agreement can be extended to Asian neighbors first by presenting full-fledged plan. However, the point to note is that the UPI regulator NPCI does not have a treasurer of its own and, hence, the transactions are going to be between intermediary banks. This will increase the chances of security thefts and so on.

Beside some technical issues, UPI is also at its developing stage, wherein it may rely on the available banks, payment service providers and regulatory guidelines in place. And the app may provide real-time exchange rates sourced from reliable financial institutions or use a fixed rate set by the user’s bank. Thereby, UPI is not fully capable to compete with international networks at the moment.

According to India’s finance ministry, more than 95,000 UPI-related scams were reported between March 2022 and March 2023. So, we need to have a robust security in place for wooing the world to adapt it in view of the benefits to home and host country. Whatever the case be, if UPI is asserted to be different from forex or debit payments, it has to have less – or even eliminate – mark-up charges. The question remains how it can be cost- effective vis-a-vis present payment systems. These points are to be cleared by the government. If the entire experiment turns out to be beneficial as being projected and hailed now as digital advancement, probably then more Indians will think to visit these facilitating countries. For Instance, the number of Indian tourist arrivals in France was reported to be 423,701 in 2022, as per the CEIC data. Also, a finding by a combined report of Expedia Group, the world’s largest online travel company, and CAPA India, the leading aviation advisory, has revealed that more than half of the country’s leisure seekers prefer heading to Dubai (UAE), Thailand, France, Singapore and Malaysia, besides Saudi Arabia, Bahrain and US.

France is the leading long-bound travel destination. In terms of spending, for a long vacation, Indians spend approximately Rs 2,00,000 per trip per person. Probably, there will be an increase in the merchandise purchases by Indian tourists in France and other countries once the hassle-free UPI is implemented. In the long run, there will be an ease in making investments.

No doubt, the import and export trade will also shoot up with this innovation. It will make transfer and receipt of remittances convenient. But, what about the exchange rate? Will there be any mark-up charges for these transactions from both sides? The payment obviously will be at US dollar exchange rate. It will be beneficial to Indian tourists as sometimes it is really hard to carry around a lot of cash.