Peru Adopts India’s UPI for Financial Inclusion

The Central Bank of the Republic of Peru (BCRP) has decided to develop a payment system akin to India’s Unified Payments Interface (UPI). This initiative is part of an agreement with the National Payments Corporation of India International Payments (NIPL). The Reserve Bank of India (RBI), a co-founder of the National Payments Corporation, has collaborated with the BCRP to secure this deal. The envisioned system aims to advance financial inclusion in Peru, where a significant portion of the population remains unbanked. India’s UPI allows for offline transactions, which has proven effective in expanding financial services. The new Peruvian payment system will also foster compatibility between domestic and international payment infrastructures.

Julio Velarde, the Governor of the BCRP, stated that this system will aid in “allowing new participants to enter the Peruvian ecosystem” while “complementing the existing payments industry.” There was no information disclosed about when this system would be launched. UPI users in India have the convenience of linking multiple bank accounts to their mobile applications, enabling 24-hour payments via virtual payment addresses, phone numbers, and QR codes.

An official statement from the BCRP highlighted its objectives, stating: “The BCRP’s objective is to promote greater access, security, redundancy, and efficiency, as well as facilitate the introduction of new use cases in digital payments.” This move is intended to make payment systems more accessible and secure for all users.

The National Payments Corporation of India International Payments (NIPL) was established in 2020 and has seen widespread adoption. Countries such as Sri Lanka, Mauritius, France, the United Arab Emirates, Singapore, Bhutan, and Nepal have officially embraced the UPI system. NIPL is also collaborating with the Bank of Namibia to create a similar payment system under an agreement made in May.

Various global entities, including Google Pay and financial institutions from the United States, Japan, China, and Singapore, have formed partnerships with NIPL. Singapore became the first nation to implement UPI through its association with PayNow in February 2023. The system’s global reach exemplifies its adaptability and the increasing demand for streamlined payment solutions across borders.

In Peru, there are already at least two stablecoins pegged to the Peruvian sol. These stablecoins are part of the increasing digital financial ecosystem that the new payment system aims to support and expand. Since 2021, Peru has been exploring the launch of a central bank digital currency (CBDC).

The BCRP has been actively collaborating with monetary authorities from China, India, Singapore, and Hong Kong to develop its CBDC. This collaboration began in 2021, a full year before India kicked off its retail CBDC pilot officially. The exploration into a CBDC underscores Peru’s commitment to modernizing its financial system and embracing digital innovation.

The establishment of a UPI-like system in Peru stands to significantly enhance financial inclusion, security, and efficiency within the country. As more nations adopt similar systems, the global payment landscape is poised for greater interoperability and innovation, ultimately benefiting users with more convenient and accessible financial services.