Using UPI for international money transfers: Users should be aware of transfer fees and exchange rate fees, says expert

UPI for international money transfers: In today's digital era, Unified Payments Interface (UPI) has emerged as a revolutionary force, transforming the way we transact. It offers a seamless and instant transfer mechanism, thereby bridging the gap between consumers, merchants, and banks, while simplifying financial transactions like never before. However, there's plenty of grey area when it comes to using UPI for international transactions. Anup Nayyar, CEO-Domestic at In-Solutions Global (a JP Morgan-backed payment solutions venture), talks about the convenience that UPI can provide for certain international money transfers and the advantages and drawbacks for end users to consider while deciding whether to use UPI for their specific needs. 

He answers the most important frequently asked questions (FAQs) while using UPI for International Money Transfers, here are the excerpts:

Q: Is UPI user-friendly and easy to navigate for initiating international money transfers?

A: "UPI (Unified Payment Interface) appears to be user-friendly and accessible for international money transfers. It has been widely adopted in India due to its ease of use and acceptance across diverse demographics, indicating its user-friendly nature for domestic transactions. UPI International Money Transfers, in collaboration with Western Union, allows for instant remittance to India, which suggests the system is designed for straightforward international transactions. Services like Wise and Western Union have integrated UPI for sending money to India, providing a simple process that involves entering the recipient’s UPI ID and the transfer amount, further implying ease of use. However, users should be aware of transfer fees and exchange rate fees associated with UPI international transactions."

Q: Does UPI allow for the instant processing of cross-border fund transfers?

A: "UPI allows for real-time processing of cross-border fund transfers. This system, developed by NPCI, enables users to instantly send money internationally using a recipient's unique payment ID. The process is designed to be quick and operates any time of the day, facilitating convenient international transactions. The integration of this service with global money transfer operators supports the immediate transfer of funds to India, highlighting its capacity for instant cross-border transactions without specifying company names."

Q: Are UPI transactions generally more cost-effective than traditional wire transfers for international transfers?

A: "UPI transactions for international transfers can be more time-saving and cost-effective than traditional wire transfers depending on the platform used. They offer the advantage of fast and potentially cheaper transactions, primarily because they only require the recipient's UPI ID rather than sharing detailed personal account information. However, users need to consider the transfer fee, which varies by amount and destination, and the exchange rate fee, which can include a service cut on the currency conversion. It's advisable to compare these costs with those of traditional wire transfers to determine cost-effectiveness."

Q: Can International money transfers be made using UPI at any time of day?

A: "Yes, international money transfers via UPI can be made at any time of the day. The system is designed for 24/7 operations, enabling users to initiate and receive transfers around the clock, which provides significant convenience for users in different time zone."

Q: Are there multiple banking and third-party apps that support UPI for international money transfers?

A: "There are multiple banking and third-party apps that support UPI, which indicates a robust ecosystem for domestic and potentially international money transfers. The system's widespread adoption across various platforms demonstrates its versatility and the ability for users to choose from a multitude of apps to conduct their transactions. The convenience offered by such a variety of choices helps to facilitate user access and could potentially make international transfers more user-friendly."

Q: Is UPI well equipped to handle efficient currency conversion international transfers?

A: "UPI is equipped to handle currency conversion for international transfers by using the prevailing exchange rate to convert the sender's currency to the recipient's currency. The system may offer real-time exchange rates from financial institutions or a fixed rate set by the sender's bank, ensuring users are aware of the conversion rate before confirming the transaction. However, additional fees may be incurred, including currency conversion costs, foreign exchange fees, and charges from intermediary banks involved in the transfer process. These factors suggest that while UPI is capable of efficient currency conversion, users should be mindful of potential costs."

Q: Can recipients of international transfers outside India lack access to UPI services?

A: "Recipients of international transfers outside India may indeed lack access to UPI services. Currently, UPI is available for Non-Resident Indians (NRIs) from certain countries who can use their international mobile numbers to set up a UPI ID, suggesting a gradual expansion of UPI services for international users. However, this service is not universally available outside India, and is limited to NRIs with specific types of bank accounts. Also, regulatory compliance and anti-money laundering checks remain the responsibility of the banks involved in the remittance process."

Q: Do different countries have regulations on cross-border payments that pose challenges when using UPI for International transfers?

A: "Yes, regulations can result in high costs, which can accumulate significantly. Moreover, due diligence, compliance requirements, and legal conflicts between jurisdictions can cause friction and delays. Currency conversion needs, exchange rate fees, and foreign transaction charges also add layers of complexity and potential costs. The involvement of various intermediaries and international banking networks can further intensify the transaction process. These regulatory and procedural complexities could pose a challenge when using UPI for international transfers."

Q: Are there limits on the amount of money that can be sent in a single international UPI transaction?

A: "Yes, there are limits on the amount of money that can be sent in a single UPI international transaction. Currently, the official limit is set at Rs 2,00,000 per transaction. If a sender needs to transfer more than this amount, they would need to opt for a direct bank account transfer rather than using UPI."

Q: Can security concerns arise while using UPI for International transfers?

A: "The key to mitigating security risks is ensuring that the recipient has set up their UPI account correctly and that their local bank allows for international transfers via UPI. Additional security measures such as encryption, secure channels for transaction processing, and compliance with international security standards are vital in safeguarding against potential risks. It is also important for users to be aware of the security features provided by their UPI service provider and to use Limited Reach of UPI, potentially hindering its use for certain international transfers. UPI's international has just taken off at the start of the year and for the duration that it has gone live, the reach is good."

"Currently, UPI services for Non-Resident Indians are available in select countries, and users need to have specific types of Indian bank accounts to utilise these services. Moreover, UPI's framework is designed in accordance with Indian banking regulations, to increase the reach to many more countries, interoperability of frameworks might be required."