Google is one of the largest users of India's UPI payment system.
Dhiraj Singh/Bloomberg
India's large and growing digital economy is drawing fintech investment and attention from foreign payment companies. The country's payment technology has now become mature enough to be exported, creating a potential alternative to bank-led payment systems.
Google Pay and NPCI International Payments have agreed to expand United Payments Interface support outside of India. The partnership will enable travelers from India to make payments while abroad. It is also designed to enable Google Pay-supporting merchants to serve Indian consumers who can use UPI apps to make payments in the consumer's own currency. Other goals include building interoperable UPI-supported real-time payment systems in multiple nations.
UPI creates a standard method to support digital payments as well as real-time processing. By exporting UPI, Google could provide an option for instant settlement for international payments that would be an alternative to bank and government-led instant payment networks in the U.S. that are still largely focused on domestic transactions.
It could additionally provide a way for Google Pay to reach U.S. e-commerce merchants with an option to sell in India — or to Indian consumers in the U.S. — using their own currency. That would also be an alternative to U.S. banks and other payment companies that enable cross-border e-commerce payments.
"The Google partnership will establish UPI use outside India and increase cross-border real-time payments," said Eric Grover, a principal at Intrepid Ventures. "Given Google's global reach, it has the potential to enable a national real-payment payment system to compete worldwide, at least on the acceptance side of the network."
Google's collaboration with NPCI comes as Walmart uses payment technology from Indian payments subsidiary PhonePe to guide Walmart's payment technology projects in other countries. Visa and Mastercard are in the midst of multi-year, multi-billion dollar expansion strategies in India, including technology hubs that can build payment products for use in India and elsewhere. And Amazon is trying to build a cross-border market for Amazon Pay that includes India.
UPI is an instant payment system created in 2016 in India, nearly two years before the RTP network and seven years before the FedNow instant payment network in the U.S. The National Payments Corporation of India, which falls under the Reserve Bank of India, operates UPI, which also has the support of India's banking industry.
Google Pay is a major user of UPI in India. PhonePe has a 46% share of UPI's volume, with Google Pay in second at 36%, according to Statista.
The number of banks supporting UPI has grown from 21 to nearly more than 500 over the past seven years, according to NPCI, and the number of monthly transactions has grown from 300 million in 2016 to 9.3 billion at the end of 2023, according to Statista.
UPI enables a connection between banks and other parties through a standardized application to execute fund transfers, point-of-sale contactless payments via QR code, recurring bills, e-commerce and other transactions. UPI's security system enables payments without the user having to enter details such as card numbers or account numbers. UPI has played a major role in "formalizing" India's economy, reducing the share of India's informal economy from more than 50% in the late 2010s to about 20%, according to SBI Research. The "formal economy" in India refers to businesses and workers that are government-regulated.
NPCI's Google Pay partnership follows similar partnerships, including a 2023 deal with French fintech Lyra to support UPI in France and 2023 deals to enable UPI in the United Arab Emirates, Canada, Australia, the U.K. and about a half dozen other countries.
"Google Pay, along with Walmart (PhonePe) are the two biggest UPI wallet providers," said Gareth Lodge, a senior analyst at Celent. "Google has a ready-made market. Just tap your Google Wallet and it'll use your UPI account and bypass the card networks."
Writing for American Banker, John Mitchell, CEO and cofounder of payments technology company E6, said "an important lesson from UPI is how a mobile-first and interoperable payments system heightens access to financial services by expanding the pool of providers. Greater competition and collaboration between market players, as well as across industries, leads to more choices for consumers and better user experiences."
In a statement, NPCI's public relations office said "this strategic partnership is aimed at facilitating the use of UPI powered Google Pay for Indian tourists worldwide, while also paving the way for numerous countries to integrate into India's real-time payment ecosystem through locally authorized payment service providers."
Google's public relations office said the goal of the partnership was to help Indians use UPI while outside India, create domestic payment systems outside of India and to improve cross-border payments.
Google's payment apps have used UPI in India for years, and at times that has drawn pushback from within the country, including a petition in 2020 to have the government ban Google's app.
Foreign payments and fintech companies have had a complicated relationship with India's regulators, which have tried to maintain local control over the country's fast-growing payments market with external, mostly U.S.-based companies that want to take advantage of that growth. Visa and Mastercard have fought with India's government over rules requiring the card networks to store India's payment data locally. At the start of the year, India banned a group of cryptocurrency exchanges, including Binance and Kraken, contending the firms were not complying with money laundering regulations. This came a week after India granted payment aggregator licenses to fintechs such as RazorPay, Cashfree and Open. This followed a 2022 ban on dozens of fintechs onboarding new customers.
Indian regulators have also imposed volume limits and other restrictions on digital payment apps, including Google Pay, according to India Today and other local media.
"While Indian regulators and NPCI want to limit Google Pay in India, they rightly understand [Google Pay] can help abroad," Grover said.
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