This summer, the United States began an ambitious experiment: a real-time payments system called FedNow. FedNow was created by the Federal Reserve to accelerate transactions in the digital age, giving businesses and banks the fast payments consumers enjoy through mobile services like Zelle or Venmo. If FedNow succeeds, it could eventually become the backbone of fast payments in the United States.
Changing the digital payments architecture of an entire country is a daunting task. Policymakers may be tempted to look to Silicon Valley for guidance. However, they would be better off looking to India for inspiration, where a similar payments transformation is well underway.
In 2016, the Reserve Bank of India launched the Unified Payments Interface (UPI) system. UPI allows almost anyone in India to transact with anyone else simply by scanning a QR code.Last year, the system facilitated virtually $2 trillion In terms of payment. What started as a small government experiment has now become the world’s largest real-time payments market – all within a few years.
I immigrated to the United States from India in 2001 to pursue a technical career. In 2018, when I returned to India to work at Amazon, I witnessed UPI in action for the first time. A colleague took the initiative to invite me to lunch. At the checkout counter, he took out his phone and scanned the QR code. I asked him what he did and he said, “Oh, it’s UPI. QR code handles transactions. Simple.”
It seemed at the time also simple. But the more I learned, the clearer it became that this humble lunch counter transaction was an example of a broader technological triumph. Soon, I noticed that UPI QR codes were everywhere — affixed to my rickshaw or stuck near the checkout counter at a store. Even the less affluent in India have personal QR codes to promote digital philanthropy.
In just six years, UPI has gone from 2 Annual transaction volume reaches 74 billion– Stunning growth rates that would make any startup the envy of them all. UPI’s success isn’t always a given. When conceived in 2009, the Indian government hoped that the new digital payments system would help the unbanked, eliminate black market activity and reduce the cost of printing money. This is a difficult task for any country, but especially India, with its multi-ethnic, multi-lingual population of billions, many of whom do not have computers, internet access or even electricity.
Indians are also notoriously suspicious of their government, an attitude captured in the darkly humorous Hindi phrase “chalta hai,” which roughly means “that’s the way it is.” However, with UPI, the government has upended expectations. When UPI was first launched, only half of Indians had a bank account. Today, that number is over 80%—a considerable public policy achievement.
UPI’s success is attributed to three factors. The first is simplicity. In technology, we often pursue flashy solutions. In contrast, UPI is built on QR codes – a technology that debuted in 1994. Anyone can connect to UPI and receive payments with just a piece of paper and a QR code – a low-tech solution that lowers the barrier to entry for everyone.
The second element is interoperability. Near Indian cash registers, you’ll find plenty of logos, whether they’re for local payment services like PhonePe India or global systems like Google Pay. With flexibility comes scale, and by opening the system to many banking partners, the government encourages trust and accelerates adoption.
Finally, India takes into account the needs and conditions of its people. UPI is a mobile-based system for a country with more than 1 billion mobile phones. The system is also free for consumers and most merchants to use – crucial in a country where 60% of the population lives on just a few dollars a day.
I’m cautiously optimistic that FedNow will achieve similar success.The United States contains approximately 6 Millions without bank accounts family and more “underbanked” residents. India’s experience shows that government-driven payment systems can propel millions of people into mainstream economic life.
While U.S. companies are notoriously reluctant to waive fees, India has shown that the private sector can get involved. UPI’s free transactions are attractive to the smallest of small businesses, such as roadside vendors spread across the country. The system also helps private banks, financial institutions and mobile phone providers in India. To use UPI, people still need a bank account and a mobile phone – which encourages people to have both. For the private sector in India, UPI facilitates smooth payments for businesses and a degree of free marketing.
Perhaps most importantly, UPI shows that, even with widespread public skepticism, governments can get substantive work done in a lively democracy. U.S. policymakers can learn a lot from India’s UPI experience—namely, whether we can suspend America’s “chalta hai” attitude long enough to try this experiment.
Maju Kuruvilla is the CEO of Bolt, an American financial technology company.
The views expressed in Fortune opinion pieces are solely those of the author and do not necessarily reflect the views and beliefs of: wealth.
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