India is the world’s largest receiver of remittance inflows; some $62.7 billion was sent in 2016-17 – more than the total Foreign Direct Investment (FDI) into the country.
Now, thanks to a partnership between mobile payments provider TerraPay and private sector lender Yes Bank, India’s diaspora will be able to make instant cross-border money transactions into the country.
The arrangement is known as a Rupee Drawing Arrangement (RDA), and it authorises TerraPay’s network partners to make instant cross-border transactions.
Migrants can enter any TerraPay partner outlet and send money direct to Indian bank accounts. Where the recipients are not Yes Bank account holders, Yes Bank will use the immediate payments service (IMPS) to disburse the funds.
The service is available 24/7, and, according to Arun Agrawal, Group President and Global Head of International Banking at Yes Bank, “is backed by Yes Bank’s API Banking platform and superior security protocols, and will boost granular FX inflows into India.”
Under RDA, banks are able to enter into tie-ups with non-resident exchange services, although the service cannot be used to send money out of India, and does not permit cash disbursement of remittances; the money must settle in the beneficiary’s bank account.
The non-cash disbursement rule does not apply under the Money Transfer Service Scheme (MTSS), which is used by money transfer services like Western Union or MoneyGram.
TerraPay is primarily a Global transaction processing, clearing and settlement service for mobile wallets, providing white-label solutions and working with Money Transfer Organisations to facilitate transactions and give users more flexibility around how, and where, they can send money.
The company recently announced that it has received regulatory approval from the Bank of Tanzania to launch an International Money Transfer Service for mobile wallets based in Tanzania.
TerraPay is part of Mahindra Comviva, the mobile financial solutions division of the Mahindra Group, which is worth around $18 billion.
In India, the Reserve Bank is contemplating allowing mobile banking wallets to receive cross-border inbound remittances. The wallets will be required to be fully Know Your Customer (KYC) compliant and can only be enabled if explicitly requested by the customer. Transaction limits will apply too – no more than 5,000 Rupees, with the maximum value of the wallets capped at Rs 50,000, according to MediaNama.
It’s clear that the regulatory authorities for financial services in India are beginning to recognise the value of digital payments within a culture that has traditionally been cash dominated.
Indeed, in February this year, Indian Prime Minister shocked the country by banning India’s largest currency bills, the 500 and 1,000 Rupee notes, in a bid to crack down on counterfeit notes and to encourage Indians to complete more digital transactions.
Around 78% of India’s transactions were completed in cash last year, as compared to 20-25% in the US and Britain, according to a report form Google India.
India opening its doors to disruptive digital banking techniques represents a clear sign that fintech services are here to stay, and the increasing number of deals and partnerships being struck is helping to make services more efficient, transparent and flexible.