In May 2023, Japan expressed its keen interest in becoming a part of India’s Unified Payment Interface (UPI) system. This development highlights the growing appeal of UPI as a potential alternative to the global financial messaging giant, SWIFT. This article explores the significance of Japan’s interest in UPI and the potential implications for the international financial landscape. The topic is relevant for the economy and international relations (IR) segments of the IAS exam.

UPI as an Alternative to SWIFT:
  1. Understanding the SWIFT System:
    • SWIFT is the world’s leading provider of financial messaging services.
    • It plays a crucial role in facilitating cross-border transactions globally.
  2. UPI’s Increasing Global Appeal:
    • UPI, an indigenously developed real-time payment system in India, is gaining momentum as a potential replacement for SWIFT.
    • Japan’s interest in joining UPI reflects the system’s growing interoperability and acceptance.
Japan’s Interest in UPI:
  1. Implications for Cross-Border Payment Systems:
    • Japan’s consideration of joining UPI signifies the possibility of UPI becoming a standard for cross-border payments.
    • This development has the potential to revolutionize the way countries conduct international financial transactions.
  2. UPI’s Accessibility for Indians Abroad:
    • UPI and RuPay, India’s digital payment systems, are already available for Indians traveling to countries like Singapore, Nepal, Bhutan, and the UAE.
    • Non-resident Indians (NRIs) can make UPI payments using their local phone numbers in ten countries, including Australia, Canada, the UAE, and more.
  3. Expanding International Collaborations:
    • India is actively collaborating with 19 countries, primarily in Europe, that are adopting systems similar to UPI.
    • Japan’s recognition of the Indian digital stack, such as the Unique Identification (UID) system, highlights the global attention garnered by India’s Digital India Mission.
The Unified Payment Interface (UPI):
  1. Overview of UPI:
    • UPI enables instant and seamless fund transfers between two bank accounts through a single mobile application.
    • Its real-time nature ensures quick and efficient transactions.
  2. Key Features of UPI: a. Immediate Transfer of Money:
    • UPI allows for instant fund transfers at any time, facilitating swift transactions.
    b. Access to Multiple Bank Accounts:
    • A single mobile application can provide access to different bank accounts, enhancing convenience for users.
    c. Virtual Address for Pull & Push:
    • UPI offers a virtual address system that enhances security by eliminating the need to enter sensitive details like card numbers, account numbers, and IFSC codes.
    d. Single-Click 2-Factor Authentication:
    • UPI adheres to regulatory guidelines while providing a seamless, one-click payment experience, ensuring both security and convenience.

Important Points:

  • Japan’s interest in joining UPI system 🇯🇵🤝🇮🇳
  • UPI as a potential alternative to SWIFT 💡💰
  • UPI’s accessibility for Indians abroad 🌍📲💳
  • Expanding collaborations with other countries 🌐🤝
  • UPI’s features:
    • Immediate transfer of money ⏰💸
    • Access to multiple bank accounts 📱💼💳
    • Virtual address for Pull & Push 🏢🔒📲
    • Single-Click 2 Factor Authentication 🔐📲✅
  • UPI’s potential to become a standard for cross-border payments 🌍💸💼
  • Recognition of India’s Digital India Mission on global platforms 🌐📲🌟
Why In News

In May 2023, Japan, along with several other affluent nations, enthusiastically expressed its interest in becoming a part of the Unified Payment Interface (UPI) system. The growing number of prominent countries showing interest in joining the system highlights its global recognition and potential for fostering international collaboration in the realm of digital payments.

MCQs about Global Appeal of India’s UPI System

  1. What is UPI?
    A. A leading provider of financial messaging services
    B. A real-time payment system in India
    C. A global forum for financial cooperation
    D. A digital stack for secure transactions

    Correct Answer: B. A real-time payment system in India
    Explanation: The essay mentions that UPI is an indigenously developed real-time payment system in India, facilitating instant and seamless fund transfers between two bank accounts through a single mobile application.
  2. Which country recently expressed interest in joining the UPI system?
    A. Australia
    B. Japan
    C. Canada
    D. United Arab Emirates

    Correct Answer: B. Japan
    Explanation: The essay states that Japan has expressed its keen interest in becoming a part of India’s Unified Payment Interface (UPI) system, highlighting the growing global appeal of UPI.
  3. What makes UPI a potential alternative to SWIFT?
    A. Its accessibility for Indians traveling abroad
    B. Its recognition by global forums like G20 and G7
    C. Its single-click 2-factor authentication feature
    D. Its virtual address system for secure transactions

    Correct Answer: C. Its single-click 2-factor authentication feature
    Explanation: The essay mentions UPI’s key features, including the single-click 2-factor authentication feature, which aligns with regulatory guidelines while providing a seamless and secure payment experience. This feature enhances its potential as an alternative to SWIFT.

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