US to connect own banks first before linking with UPI

The US is connecting its bank network first and could later link it with India’s Unified Payments Interface (UPI), US Federal Reserve board of governors member Christopher Waller said on Wednesday.

Under UPI, all banks are connected in India, Waller said, unlike in the US where there was “no functioning domestic connected payment network.”

“There is the real time payments system in the private sector in the US, but that has only 1,000 banks attached to that network. So it is just going to take time because of our unique situation,” he said at the Global Fintech Fest in Mumbai on Wednesday.

The US had launched its FedNow network on 25 July last year to enable banks and other financial institutions to offer customers instant retail payment services.

Currently, it has onboarded only about 1,000 banks of the nearly 9,000 depository institutions in the US, Waller said.

Initially, some of the larger banks had built the network, while the smaller banks wanted to build their own network.

“8,900 banks have to coordinate, with some of them having to build their own fast-payment network. It was a massive coordination problem,” Waller said. “So we started building the FedNow system and launched it last year. About 1,000 banks have signed up, and it’s a long process to get all these banks hooked up.”

The Unified Payments Interface, developed by the National Payments Corporation of India, is a real-time payment system enabling instantaneous money transfers between bank accounts through mobile devices.

Launched in 2016, UPI has swiftly expanded, now incorporating about 300 banks and offering a seamless, cost-effective digital payment experience.

As of 2024, UPI handles more than 10 billion transactions monthly, with the total value of transactions per month surpassing ₹15 trillion