Dubai: Key sectors in the UAE - from retail to hospitality to gold and jewellery sales - will be immediate beneficiaries as Indian tourists get the option to pay for their transactions using the rupee and linked to their bank accounts in India.
What this will achieve is seamless payment for products and services in the UAE by Indian visitors through their smartphones. No longer will they need to spend using the dollar or dollar-linked credit/debit cards.
So, whether it is a tourist wanting to buy a piece of jewellery at the local gold souq or a business traveler paying for a hotel booking, all they need to do is swipe using their smartphone featuring the apps of their bank in India.
This will be done through India’s Unified Payments Interface (UPI), and more banks, merchants and payment networks in the UAE are linking up to make rupee-based transactions in the UAE possible for visitors from India.
Last week, a major milestone was reached when the UAE payments platform Network International signed a partnership agreement with India’s NPCI International Payments. This would allow acceptance of QR code-based UPI payments across point-of-sale terminals operated by Network International in the UAE.
Network International has over 200,000 PoS terminals operating with 60,000 and over merchants in the UAE.
We have been told UPI rupee payments will be more competitive than incumbent card solutions here
In the near future, more services providers will make UPI-linked transactions possible, sources add.
“The setup and training for store staff is still happening as they need to learn how to use the QR-based systems on the PoS machines,” said Ashish Panjabi, Chief Operating Officer at Jacky’s Group. “Integration to our systems also need to be done.
“We have been told UPI rupee payments will be more competitive than incumbent card solutions here.”
Cost for use will be key
For Indian visitors, the cost of using their rupee-based domestic account will be decisive in ensuring UPI payments will prove a popular choice on their trips to the UAE.
Market sources say there could be a daily transaction limit of Rs1 million (or Rs10 lakh) set by the RBI, India’s central bank, in the initial stages of the UPI rollout in the UAE.
“Expectation is that the fees for the user could be lower as the actual UPI-based transaction cost in India is zero,” said a retailer.
But will that be the case?
According to Krishnan Ramachandran, CEO of the financial services firm Barjeel Geojit, “Yes, there is a bit of concern on the transaction costs due the forex element.
“But this could over time come down once transaction volumes increase (in the UAE through the UPI platform).
“It is expected that more UAE banks will also enable and support UPI.”
The use of Indian rupee-based UPI transactions in the UAE are expected to increase sharply
In a typical card payment, there are two fee components - a transfer fee and a forex conversion cost. (A $1,000 transaction, for instance, would typically attract an $8-$12 transfer fee plus the forex cost.)
Big break for some UAE retail sectors
Allowing Indian tourists to spend using their rupee accounts could be a big breakthrough for some sectors in the UAE. The gold and jewellery market is quite keen on the possibilities this opens up.
“The ability to use their home currency - the rupee - directly will enhance the shopping experience and convenience for Indian visitors wanting to buy gold,” said Anil Dhanak, Managing Director at Kanz Jewels. “This could, potentially, increase their spending power and boost sales for retailers in the UAE.
“In fact, many Indian tourists already prefer to use the rupee when buying gold. What UPI transactions will now do is further cement the UAE’s status as a premier shopping destination.”
Full transparency
The UPI and rupee payment option also provides Indian travelers to the UAE a chance to be fully transparent with their spending when on these trips. “For instance, it’s always good to maintain a clear bill of records when it comes to gold and jewellery purchases,” said a financial services consultant. “Indians traveling to the UAE would now have that transparency on such spending. A rupee-based transaction linked to their Indian bank accounts is thus ideal.”
Many Indian tourists already prefer using a rupee payment option when it comes to buying gold ornaments
What should UAE merchants do?
It’s still early days on the UPI payment system for UAE merchants and other service providers. But sign up will certainly be a high priority for many of them.
UPI transactions do not involve an intermediary bank. The partnership between Network International and NPCI International Payments Ltd. (NIPL) facilitates smooth and secure cross-border transactions for Indian travelers visiting the UAE, streamlining the entire process
According to Arun John, Chief Market Analyst at Century Financial, “UAE businesses should explore the option of collaborating with a payment processor such as Network International.
“They should also incorporate QR code scanning capabilities into their point-of-sale systems and transparently communicate the exchange rate for each transaction to prevent any potential confusion in the future.
“Embracing UPI payments can be advantageous for retailers as it streamlines the process for Indian tourists since they are familar with it, potentially leading to increased foot traffic and business growth.”
We are pleased to see UPI payments being accepted in the UAE, marking a key milestone in offering seamless and convenient payment solutions for Indian travelers. As the pioneer of mobile payments, QR code payments, and many such innovations in India, Paytm is proud to contribute to the UPI adoption and growth, which aligns with the Government of India's mission
