Dubai: High value purchases of gold and jewellery or top-of-the-line smartphones and electronics will likely be the initial beneficiaries as visitors from India use the rupee to shop in the UAE under the UPI (Unified Payments Interface) option.
This week, the hypermarket operator LuLu rolled out UPI Payments at all its UAE stores. Visitors from India need to just scan their UPI QR code at point-of-sale machines in LuLu outlets. For this, they can use their UPI-enabled apps – using the mobile number they have in India - or the RuPay card to make payments on purchases in the UAE.
The payment is made using the funds tied to their bank accounts in India.
That is, in Indian rupees, rather than in dirham, dollar or any other currency – in cash or credit card – done in the past. The UPI is directly connected to the visitors’ bank accounts in India, and payment for a transaction here gets done instantly. Much like what those shoppers would experience if they bought anything in India.
“The UPI payment facility made available in UAE will greatly benefit over 10 million Indians who travel to the UAE every year, upgrading their convenience and boosting the local trade and economy," said V. Nandakumar, Director of Marketing at LuLu Group.
Other retailers and sectors – such as hotels - in the UAE are rushing to introduce the UPI payment option for visitors from India. The 10 million visitors a year does provide the size to make the necessary investments into their payment systems.
Is UPI cost effective for Indian visitors?
According to retailer sources, the processing fees for such rupee transactions in UAE could be lower than the typical charges that payment networks such as Visa or Mastercard currently have.
“For the UAE retailer, the funds from a payment done using UPI will come at the same time,” said Ashish Panjabi, Chief Operating Officer of Jacky's Group. “The final rates for the processing charges are being negotiated.”
The UAE merchant engaged in a UPI transaction will receive the funds instantly. It's a smooth process right through
Big-ticket purchases
In the coming weeks, gold and jewellery retailers in the UAE reckon they will likely be the first gainers from rupee deals. “With such rupee payments, there will be a saving for UAE jewellery merchants and which can be shared with the customers from India using UPI,” said Abdul Salam K.P., Vice-Chairman of Malabar Gold & Diamonds, which will soon put in place rupee payment options at its UAE stores.
“Shoppers in India have got quite comfortable using the UPI, and it will be the same vibes that Indian tourists will derive when shopping in the UAE. The gold trade here expects to see that happen soon.”
There will be savings for UAE jewellery merchants from UPI payments and which can be shared with the customers from India using it
Industry sources say that the costs involved will benefit shoppers from India and retailers here. “Suppose the visitor is planning on purchasing Rs500,000 worth of jewellery for his daughter's wedding,” said a gold retailer. “Once he decides on the spend and if that amount is available in his bank account in India, using that amount on jewellery purchases here is straight forward.
“Since that amount already is there in his account, he needn’t have to bother about the Indian tax man would think about his spending in the UAE. The tax man’s only lookout is on the money going into the account.
With UPI payment facilitation, a major hurdle for Indian tourists will be removed. One needs to examine if UPI facility could also be used for B2B payments and the corresponding related foreign exchange regulations of India
"As for the shopper from India, he gets to choose from some of the best collection of jewellery anywhere in the world.
Retail sources say that direct price comparisons will always favour buying in the UAE, even after factoring in for currency exchange, processing fees, etc. India's domestic pricing of any product needs to factor in GST (Goods and Services Tax) and other cess. "If UAE retailers can show that buying a high-end smartphone or camera actually costs less even if the Indian tourist buys in rupee, this creates new selling opportunities," said a retailer. "This is what they should focus on in the next few weeks - prove that it's not only gold or jewellery buying that benefits from UPI."
Big or small payment, it's all good
There are those retailers who say that UPI has its uses even for less expensive purchases. "It is equally beneficial and sensible for everyday transactions of any size, contributing to a smoother and more efficient payment experience overall," said Anil Dhanak, Managing Director of Kanz Jewels. "Shoppers from India have already started asking us whether we are taking UPI.
Shoppers from India have already started asking us whether we are taking UPI. It is a matter of time before UPI acceptance becomes widespread in UAE retail
"UPI transactions use the two-factor authentication and encryption, which is crucial regardless of transaction size. Most important, UPI transactions often have minimal or no transaction fees, which benefits both consumers and businesses, irrespective of the purchase amount."
