India is advancing its efforts to simplify cross-border payments by developing a plug-and-play system. The initiative aims to create a flexible and scalable framework that can be easily adapted by different countries, thereby making international money transfers as straightforward as domestic transactions.
This move is part of a broader strategy centered on Digital Public Infrastructure (DPI), which has played a key role in India’s digital transformation. These public sector-driven tech systems are designed to handle vast amounts of data and ensure interoperability between different financial systems, making them cost-effective on a global scale.
Over the past decade, India’s banking system has undergone a significant technological overhaul, promoting financial inclusion through digital ID systems, digital payments, and robust data processing infrastructure. Central to this transformation is the Aadhaar biometric ID program, which has provided nearly 1.4 billion Indians with a digital identity, and the Jan Dhan accounts, which have integrated over 500 million previously unbanked individuals into the financial system.
As India moves forward with its digital currency plans, the Reserve Bank of India (RBI) remains cautious. The ongoing pilot for the Central Bank Digital Currency (CBDC) has already engaged over 5 million users and involves 16 banks. However, the RBI emphasizes the need for careful consideration, stating that they should not rush the rollout of the CBDC. They aim to fully understand the implications for users, the economy, and the financial system before making significant advancements.
The new plug-and-play system, leveraging technologies such as Fast Payment Systems and CBDCs, is expected to address the high costs, slow processing times, and lack of transparency that currently plague cross-border payments. According to RBI officials, this system could greatly benefit the global community by making international transactions as seamless as those within a country.