By: Kamal Baruah
I was awestruck by the QR (Quick Response) Scan Code pointed to me by a poultryman as I didn’t have chillar to owe him for a desi murga. India gets digitized! Wow! It reaches into every nook and cranny of our market. In olden times, people acquired things they needed to survive by bartering. Now after a system of monetary exchange evolved, the currency becomes the lifeblood of the economy, and routine transactions such as deposits, withdrawals, and transfers have made all the difference. One of the traditional ways of transferring money between accounts is writing a Cheque or a Debit Voucher. It also transfers funds through NEFT or RTGS from one bank to another. Interestingly bank isn’t the only option to send money. In most cases, you’ll be able to send right from an App (e.g. YONO from SBI). Internet banking on a bigger screen of a Laptop or Notepad could overcome the condition of leathery fingers.
After demonetization, UPI has been at the forefront of India’s digital payments revolution, making faster inroads into retail payments. PhonePe, Google Pay, Paytm, BHIM and Amazon Pay, etc. make cashless payments faster, easier, and smoother for millions of people without using Credit/Debit Card. The world is now watching how India’s NCPI built UPI-like scalable architecture for digital payments. Now one might be wondering how to transfer money internationally? I had the privilege of working with the International Banking Division for Forex Transactions. Nostro (ours) / Vostro (yours) accounting, LCs (Letter of Credit) issuance and guarantee, Western Union are days of our lives at IBD. According to the RBI guidelines, resident individuals can remit up to $1 lakh a year for a child’s education, while under the Liberalized Remittance Scheme; they can transfer up to $2 lakh a year abroad for various purposes, such as investment, education and medical treatment. Banks receive an order for export-import trading that passes through wire messages.
Well, there are various options to transfer money internationally. It would take 10-12 days to deposit in the individual’s account through a foreign currency Demand Draft for abroad. A fast way to transfer money is through a mechanism called SWIFT (Society for Worldwide Interbank Financial Telecommunication) wire transfer between 1-4 working days. Money can also be sent from one PayPal account to another from US online payment gateway. Another quick way is through MoneyGram and Western Union. This facility is limited only to receiving funds, not to sending money abroad. Although indigenously developed Payment System RuPay from NPCI supports the issuance of Debit, Credit, and Prepaid Cards by banks in India there are issues with overseas transactions as it’s not an international/regional network like China’s Union Pay. But when it comes to Credit Cards, the Indian market is dominated by the Visa-MasterCard.
After the Red Army’s invasion of Ukraine, MasterCard, Visa, and PayPal have suspended operations in Russia. Now Russia faces sanctions from the EU to the US as modern war isn’t just about guns and battles, there are economic sanctions. Now NATO threatens Russia to protect Ukraine. It divides the world as a quick historical reminder of how a Regional War could explode into a World War. Most likely, China will support Russia financially. On the other hand, India has had strong strategic, military, economic, and diplomatic relations with the Soviet Union since the Cold war period. Are we heading for another World War III? Putin may win all the battles but still, lose the war as trade wars have strategic significance in today’s world. Apart from all, global finance and cryptocurrency, in particular, took a significant hit now Western allies blocked certain Russian banks’ access to the SWIFT payment while cutting a bank from SWIFT is like cutting a person off from the internet. SWIFT a Belgium-based company is a safe and secure payment system that has been around since the 1970s and it consists of a network of 11000 financial institutions located in over 200 countries.
Continued sanctions would hit the Russian economy and its trade for instance Iran faced a SWIFT ban after its nuclear program in 2012. Russia was threatened to be excluded from SWIFT during the Crimea Crisis in 2014. As a lesson learned, China has developed its own CIPS (Cross Border Interbank Payment System) in 2015 with Hong Kong for settling payments in yuan. Russia also did something similar with SPFS – an alternative to SWIFT in 2017 with limitations to countries such as Armenia, Turkey, Uzbekistan, and Kazakhstan. The move to ban Russia will hasten a new era for global monetary flows. Will RuPay hold the scope in Russia? India, Russia, and China are now exploring an alternative to the US-dominated SWIFT in a bid to smoothen trade. While India still does not have a domestic financial messaging system such as Ripple (US), INSTEX (EU), etc., it plans to link the Russian platform that is under development. Cryptocurrency trading Bitcoin in Russia has soared as the Ruble was battered by western sanctions which aim to squeeze Russia’s economy and sever it from the global financial system.
The alternative to SWIFT is surely on the agenda of the BRICS summit, while member states Brazil, Russia, India, China, and South Africa are looking into the possibility of trading directly with each other in national currencies. Now with SBI, Western Union can help you send money to and from India. But there are higher fees and exchange rates charged by money Transfer Companies for SWIFT transfers. SWIFT is used by almost half of all cross-border payments globally. India needs to Indianize its technology and another form of SWIFT from NPCI would certainly help to increase fund transfer options and to evolve as the best payments network internationally.