Cross-border real-time payment linkages can lower remittance costs but raise regulatory challenges.

Q. Cross-border real-time payment linkages can lower remittance costs but raise regulatory challenges. Critically analyse. (15 marks, 250 words)

Cross-border real-time linkages connect national fast-payment systems for instant settlement — India's UPI–PayNow with Singapore (2023) [1] and the new UPI–KHQR corridor with Cambodia's ACLEDA Bank (2026) [2]. They sharply cut remittance friction, yet stress-test regulatory readiness across jurisdictions.

How they lower remittance costs - Bypass intermediaries: transfers skip correspondent-banking chains and card networks (Visa/Mastercard), slashing fees and settlement time [2]. - Scale economics: UPI, recognised by the IMF as the world's largest real-time system (~49% of global real-time transactions), spreads fixed costs thinly [3]. - Inclusion & travel ease: Indian travellers scan KHQR at Cambodian merchants, reducing cash/FX dependence [2]. - Strategic dividend: UPI is live in 8+ countries, advancing DPI-led economic diplomacy and Act East [4]. - Directly serves G20 cross-border payment goals — cost, speed, transparency, access [5].

Regulatory challenges - AML/CFT & KYC standards differ across countries, raising money-laundering and fraud exposure [5]. - FX and capital-control compliance (FEMA, LRS) plus settlement-currency mechanics remain unresolved in phased rollouts [2]. - Data localisation and cybersecurity risks multiply when interlinking architecturally distinct systems — UPI (IMPS-based) with Bakong (blockchain) [2]. - Consumer protection: cross-border dispute redress and liability rules lack a common framework; central-bank (RBI–NBC) cooperation, though quick, is treaty-lite [2].

On balance, benefits outweigh risks where guardrails are embedded. Phased rollout with harmonised KYC, robust RBI-led coordination and G20-aligned standards can convert these linkages into a scalable, secure template for the Global South.

(~252 words)

Sources: 1. PM jointly inaugurates UPI–PayNow (Singapore) linkage, PIB (2023) — India's first real-time cross-border linkage 2. NPCI International & ACLEDA Bank launch cross-border UPI in Cambodia via KHQR, PIB (2026) — corridor design, phased scope, DLT-vs-IMPS interlink, settlement/regulatory gaps 3. UPI recognised as world's largest real-time payment system by IMF (~49% share), PIB (2025) — scale economics 4. UPI now live in over eight countries, PIB (2026) — DPI export footprint 5. G20 Roadmap for Enhancing Cross-border Payments, FSB — cost/speed/transparency/access goals and AML alignment