PhonePe taps cross-border UPI payments in revenue push

Indians traveling to many foreign markets, including the UAE and Singapore, may soon be able to use the popular UPI payments to make purchases when they land there.

Bengaluru-headquartered fintech giant PhonePe said on Tuesday that it’s extending support for UPI international payments in the UAE, Singapore, Mauritius, Nepal and Bhutan.

“Users will be able to make payments in the foreign currency directly from their Indian bank — just like they do with international debit cards,” PhonePe said in a statement.

The move appears to be PhonePe’s attempt to capture a slice of the large forex market, a category where there is a clear way for payment apps to make additional money, according to fintech industry executives with no affiliation with PhonePe.

PhonePe’s step is also in line with the vision of NPCI, the body that oversees the UPI payments, which believes that within this year Indians in many foreign cities (including Dubai) will not need to use any other payment method, according to one of the fintech execs.

A couple of other fintech apps are also expected to add cross-border UPI support in the coming months. UPI, built by a coalition of retail banks in India, is the most popular way Indians transact online. It processed over 8 billion transactions last month. UPI international is on the current NPCI’s roadmap.

Onboarding merchants to accept the UPI payments in the foreign markets will be a key test for India’s NPCI, because without merchants, users on PhonePe and other Indian UPI payments apps won’t be able to make any payments. Ideally, the acquiring side UPI players will need to partner with local payments processor or aggregators that can extend support for UPI at scale among the local merchants. In India, while the UPI QRs are ubiquitous, the same is not necessarily the case elsewhere.

It’s not the first time a mobile payments app has pushed to serve its home users in international markets. WeChat Pay and Alipay offer a similar service to their customers in many nations. But even for the Chinese players, merchant acceptance has been the key growth challenge overseas.

PhonePe is the most valuable fintech startup in India. Valued at $12 billion, the startup clocked a revenue of $234.3 million in the first nine months of 2022. The Walmart-backed startup is the most popular UPI app, commanding over 50% of the market share. But UPI currently doesn’t have a business model, forcing the participant players to look at other avenues to make money.

“UPI international is the first major step in letting the rest of the world experience UPI too,” said Rahul Chari, co-founder and chief technology officer of PhonePe, in a statement.

“I am sure this launch will prove to be a gamechanger and will completely transform the way Indians traveling overseas pay at merchant outlets abroad. PhonePe has always prided itself in being the first TPAP to take new UPI features to the market, and this time is no different. We are glad that PhonePe is leading this change. The entire world needs to experience UPI!”