On Feb 21, managing director of the Monetary Authority of Singapore (MAS) Ravi Menon and Reserve Bank of India (RBI) governor Shaktikanta Das, each in their respective countries, made almost immediate cross-border payments from their smartphones.
The transactions were executed live at the launch of the linkage between Singapore’s PayNow and India’s Unified Payments Interface (UPI) between MAS and RBI, and were completed in less than a minute — comfortably outperforming the central banks’ conservative estimate of up to five minutes to complete each payment.
The launch was a “gift” to residents of both countries and one that they had been “eagerly” awaiting, says Indian Prime Minister Narendra Modi, who officiated at the ceremony with Singapore’s Prime Minister Lee Hsien Loong.
The real-time speed at which residents of Singapore and India can now send and receive funds between their bank accounts and e-wallets across the two countries at a low cost will ultimately benefit migrant workers, professionals, students and their families, says Modi.
Customers of participating financial institutions in Singapore and India can now make monetary transfers between the two countries using just their mobile phone number, UPI identity or virtual payment address, using the existing PayNow and UPI interfaces with which users are already familiar.
In Singapore, the participants are DBS Group Holdings and Liquid Group, while Axis Bank, DBS India, ICICI Bank, Indian Bank, Indian Overseas Bank and State Bank of India are the Indian participants.
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Liquid Group, a fintech company specialising in digital payments, is the first non-bank financial institution to participate in Singapore’s cross-border real-time payment system linkage through its LiquidPay e-wallet. The service will be made available to the Singapore customers of DBS Bank and Liquid Group under a phased approach. The institutions will then progressively increase the number of eligible user groups and transaction limits till the end of March.
Meanwhile, customers of all participating Indian banks will be able to receive funds through the service from the onset. At launch, the sending of funds is limited to customers of ICICI Bank, Indian Bank, Indian Overseas Bank and State Bank of India. The scope will be gradually expanded.
‘Milestone’ in India-Singapore relations
Following the official launch of PayNow-UPI, Modi tweeted that the linkage of real-time digital payments systems represented a “new milestone” in bilateral relations. Lee says the idea of linking PayNow and UPI was conceived in 2018 during Modi’s visit to Singapore. The central banks of Singapore and India began working on the linkage in “earnest”.
“Cross-border retail payments and remittances between Singapore and India amount to over US$1 billion ($1.3 billion) annually. Over the years, we have progressively enhanced our cross-border payment connectivity,” says Lee.
The PayNow-UPI linkage builds upon earlier efforts by Singapore’s Nets and India’s NPCI International Payments to foster cross-border card and QR code payment interoperability.
This linkage is expected to take retail connectivity another step forward and will anchor trade, travel and remittance flows between the two countries while also supporting India’s G20 presidency priorities to drive faster, cheaper and more transparent cross-border payments.
“As the world becomes increasingly globalised and interconnected, we believe in collectively harnessing technology to expand access to fast and seamless cross-border payment services,” says Shee Tse Koon, Singapore country head of DBS Bank.
“With India being one of DBS’ biggest markets for overseas remittances, this is a particularly welcome addition to our wide-ranging suite of payment solutions for SMEs, retail customers and especially migrant workers, who now have another convenient option to send money to their loved ones back home,” Shee adds.
DBS and POSB customers can make overseas payments and fund transfers across more than 200 destinations through a wide range of DBS payment solutions, including its primary remittance service DBS Remit. PayNow-UPI will target smaller payments that can benefit from the convenience and expediency of the service.
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Of the three local banks in Singapore, DBS has the biggest presence in India, after DBS India was directed by the Indian government to “amalgamate” Lakshmi Vilas Bank, which has hundreds of branches mainly in southern India.
Paving the way for multilateralism
The PayNow-UPI linkage is also the world’s first real-time payment systems linkage to use a scalable cloud-based infrastructure which can accommodate future increases in the volume of remittance traffic. This infrastructure’s open platform, application programming interface-enabled nature allows the system to be implemented in other markets.
Following the launch of Singapore’s first bilateral linkage with Thailand’s PromptPay service — the world’s first linkage of real-time payment systems — in April 2021, plans for the PayNow-UPI linkage were announced in September 2021, with an expected launch period in the second half of 2022. Later in September 2021, MAS announced another bilateral linkage between PayNow and Malaysia’s DuitNow, with the expected launch period of 4Q2022.
In July 2021, the Bank for International Settlements (BIS) Innovation Hub and MAS published a proposed blueprint for enhancing global payments network connectivity via multilateral linkages of countries’ national retail payment systems.
Titled Project Nexus, the blueprint outlines how countries can fully integrate their retail payment systems onto a single cross-border network — allowing customers to make cross-border transfers instantly through their mobile phones or internet devices. Through Nexus’ technology, existing and future bilateral linkages between Singapore and other countries have been and will be created.
MAS continues to work with BIS Innovation Hub, aiming to address the challenges of speed, cost, access and transparency. It seeks to bring faster speed, such as having transactions cleared within 60 seconds on a 24/7 basis; lower costs at a transfer value of less than 3%; and create wider access to enable connectivity for banks and non-bank financial institutions.
The collaboration also looks to create greater transparency in the upfront certainty of fees due, provide immediate updates on transaction statuses, and offer high levels of security by leveraging strong security and risk mitigation protocols.
Taking a multilateral approach to Nexus, each country would only need to link its real-time payment system once to a “Nexus gateway”, providing direct connectivity to all the other countries already within the network. Nexus would also be a unified solution that coordinates payment, foreign exchange conversion, message translation and compliance, streamlining the cross-border payment process.
Over the past few years, MAS has kickstarted several collaborative fintech projects. These projects involve the areas of remittance and programmable money, among others.
