Making India-Europe transactions to get easier and cheaper? UPI to join forces with ECB's TIPS—Key takeaways

A proposed interlinkage between payment systems UPI and TIPS is set to facilitate cross-border remittances between India and the Euro Area. The RBI along with NIPL -- the international arm of payments authority NPCI -- will continue to work closely with the European Central Bank (ECB) to operationalise the UPI-TIPS link, including technical integration, risk management and settlement arrangements, the Indian central bank said on Friday.

As part of the G20 roadmap for boosting cross-border payments, the RBI and the ECB have agreed to commence the realisation phase for the linkage. The RBI also said it has been pursuing the interlinking of UPI with the ECB's TARGET Instant Payment Settlement (TIPS) -- the instant payment system operated by the Eurosystem.

The move is set to give people in both regions faster and cheaper cross-border money-transfer options. With the project now entering its next phase, RBI, NIPL and the ECB will work together on the technical integration, while preparing the required security and settlement systems.

Here are key things to know about this project:

What is India-Europe UPI-TIPS linkage all about?

• India and Europe are developing a framework to enable real-time money transfers using domestic platforms: UPI in India and TIPS in the EU
• The initiative aims to build a technical bridge connecting both systems for seamless cross-border payments
• It includes aligning cybersecurity standards and risk-management protocols across jurisdictions
• Settlement mechanisms must be created to ensure smooth, accurate cross-border fund transfers
• Both sides need to meet regulatory and compliance requirements in India and the EU
• Once operational, Indian users may be able to pay in Europe through UPI apps
• Europeans could send money to India via their local instant payment platforms without intermediaries or high fees

UPI-TIPS | Why are the payment systems being interlinked?

• The main objective is to simplify and reduce the cost of cross-border payments
• This is in line with the G20’s global roadmap
• Current India–Europe transfers involve:
  • High charges
  • Long processing times
  • Multiple correspondent banks