Sibos 2024: Watch this space – record high remittances and the India growth story

India is fast emerging as a blueprint for players in the payment industry, particularly in the competitive cross-border sector. So what factors are fuelling this growth, and what lessons can the rest of the world draw from India’s success?

The cross-border payments landscape in India has seen significant transformation in recent years

The cross-border payments landscape in India has seen significant transformation in recent years, creating a competitive environment that has thrived on a best-in-class domestic payments infrastructure. A winning combination of tech advancement, the globalisation of trade, and regulatory reforms aimed at digitising paper trails has changed how the country pays.

Drivers of India’s cross-border flows: remittances and trade

India is the largest recipient of remittances globally. In 2022, India was the first country to hit over $100 billion in remittances – a record high, and up 24% year on year.

While inward remittances support the lower socio-economic strata of the country, the burgeoning middle class in India is contributing to outward remittances – especially in sectors like travel and education. Indian travellers are expected to be the fourth largest global spenders in terms of leisure travel, according to a recent McKinsey report. This also extends to education, particularly for overseas students.

With all this in mind, the rising demand for travel and a seamless payments experience has become a significant opportunity, with ambitions and innovations supported by larger financial institutions.

With the Indian government focused on developing cross-border trade and manufacturing via its Make In India programme, fintech companies in India are undoubtedly capitalising on the opportunities presented. In collaboration with FIs, they are developing solutions to help local exporters collect payments seamlessly from overseas buyers and enabling global merchants to use home-grown payment methods like UPI.

This digitisation of cross-border transactions is boosting economic growth and financial inclusion while reducing costs and increasing efficiency. Rising e-commerce and the growth of digital platforms have further empowered Indian SMEs to access global markets, complementing the fintech and big bank initiatives. This synergy has led to significant increases in international sales for sectors like OTT (+194%), EdTech (+51%), SaaS (+73%), PaaS (+74%), and IaaS (+130%) over the past two years, demonstrating the impact of integrated financial and governmental support.

The regulatory and tech push

Thanks to a mammoth effort from the Reserve Bank of India (RBI), digitalisation has been promoted alongside developing frameworks and guidance for trade imports and exports. The regulator’s innovative and proactive approach has enabled fintechs to participate in the otherwise guarded remittances flow, enabling global fintechs to offer their solutions, in partnership with banks, to Indian residents.

The RBI has also embraced experimentation in a controlled test environment, clearly demonstrating its commitment to innovation in the field.

Furthermore, technologies like blockchain have significantly contributed towards streamlining cross-border payment flows for India, similar to their impact on global systems. India’s integration of Swift GPI and UPI for international transactions has enabled more transparent and fast payments. The key beneficiaries are the end users, with account validation and other value-added services making cross-border payments more secure and transparent.

As India continues its upward trajectory – positioning itself as one of the fastest growing major economies – cross-border payments will play a crucial role. Watch this space…

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