Inside the Upside of India’s New Bundled, Cross-Border Remittance System

In India, a broadening by the Reserve Bank of India (RBI) of the ways and means through which citizens can send money abroad will open the floodgates to FinTechs and other businesses dealing with cross-border payments.

Reeju Datta, co-founder of Cashfree Payments, told PYMNTS’ Karen Webster that the central bank’s Liberalized Remittance Scheme (LRS) will have the most immediate impact on the education, travel and investing spheres. The revised scheme will now let third-party providers such as Cashfree Payments help businesses offer-cross border payment services to consumers in India seeking to send dollars abroad.

“Everyone is coming online, the growth rates in these market segments are very fast,” he said. “And companies want to access the market without having to set up business in India,” with an actual (physical) presence in that market or by integrating with banks directly — a time-consuming and costly process.

On the other side of the equation, Indian consumers are increasingly traveling for work, for pleasure and to pursue higher education. But for the FinTechs and the enterprises who want to tap these (and other) verticals, a bit of help is in order.

In particular, he said, Cashfree Payments, as a B2B platform, makes it easier for enterprise clients desiring to reach India’s hundreds of millions of consumers to embed payments into their flows in a compliant manner.

18-Month Process

 The conversation happened just as Cashfree Payments recently secured approval from RBI, the central bank of India, to be part of the LRS — the culmination of an 18-month process.

Getting a bit more granular, he said, the Liberalized Remittance Scheme allows Indian consumers to send money outbound for specific use cases, up to a limit of $250,000 USD annually. He noted that such transactions had previously been the domain of only banks and other specifically-regulated entities in India (known as “authorized dealers,” or AD for short).

“But now,” he explained, “the central bank is allowing third-party entities such as Cashfree Payments, a payments processor, to become a part of the ‘customer-facing’ leg of the flow.”

After opening up those remittances to a wider range of providers, he said, senders and receivers will enjoy the benefits of better convenience, lower costs and greater processing and transfer speed.

For LRS inclusion, he said, Cashfree Payments had to “tweak” its existing product to ensure that the compliance-related requirements of cross-border transactions would be fulfilled. There were also additional considerations tied to foreign exchange (FX) rates and tax reporting.

But as an end result, he said, Cashfree Payments is enabling other FinTechs to embed payments into their flow in a compliant manner.

FinTechs using the Cashfree Payments platform can broaden available use cases to Indian consumers and unlock potential — for example, FinTech investment platforms can use Cashfree Payments to offer retail investors in India the option to make payments in local payment modes like UPI, netbanking, etc., and then the funds are remitted to the relevant partner institution. By the next day the funds will be available for investment. That means that investors can now own and trade other assets, too, including foreign listed stocks, mutual funds and ETFs.

Reeju said Cashfree Payments is endeavoring to speed those funds’ availability and make it same-day while also making it easy to digitally collect documents required for KYC.

“All of this back-end activity takes place in a seamless manner,” Datta told Webster, “and now it’s almost on par with domestic payments processing.”

Other use cases extend into verticals such as education, where Cashfree Payments is partnering with FinTechs and educational consultants to help them offer parents and students options to transfer funds to overseas educational institutions. There are additional complexities, he said, as payments for education-related transactions tend to be of high value. In such cases UPI as payment mode might not work, since the UPI limit is $1300; other payment modes that support higher-value payments need to be used. Another complexity is that educational payments are almost always accompanied by loans and additional tax considerations — the set of documents varies, and all this needs to be “built into” the payments flow.

Along the way, he said, the platform model (and LRS scheme) also allows students to receive the funds they need to tackle the personal expenses associated with living in another country, such as setting up an apartment.

Borders Are Opening

Travel represents another promising vertical, said Datta, as India remains a strong outbound travel market — and the pent-up demand is there, given that the pandemic kept everyone home for so long.

Travel payments are complex, he said: travel agents and aggregators need different document flows to accompany payments, from tickets to passports. There’s a healthy offline presence in the industry, too, as travel agents typically serve rural consumers — though more of those businesses are moving online.

Along the way, he said, the platform model (and LRS scheme) will be customizable for segments like education, travel, family remittance and investments, among others.

Datta told Webster, “at the heart of it, Cashfree Payments is making it easier for businesses to tap into the fast-growing market that is India with its LRS platform.”

Bank of America’s Take on Latin America’s Digital Payments Advantage

Digital payments are growing in Latin America as companies like Mercado Libre and TerraPay rapidly advance digital banking and digital wallets in the region.

Central bank instant payments mandates and modernized infrastructure in Brazil have also moved the needle to the point where the region is arguably moving faster toward digital transformation than anywhere else in the world.

PYMNTS Intelligence’s “How the World Does Digital” report surveyed 67,000 consumers across 11 different countries. It found that Brazil was far ahead of all of them — including the United States — in digital engagement. Drilling down into the results, in 2023, 66.8% of Brazilians used mobile banking apps on their phones at least once a month, and 46.8% used these apps at least weekly.

Consumers in Brazil are embracing digital payments as well. The report found that by 2023, two-thirds of consumers in Brazil had smartphones and 75% had debit cards. In the same year, 77% of consumers in Brazil were using Pix, the instant payments app for mobile phones launched by the country’s central bank.

“After many decades of the status quo in payments, Latin America is going through a major transformation,” Marcelo Moussalli, managing director and Latin America product head executive at Bank of America, told PYMNTS.

That transformation is being driven by the two largest economies in the region — Brazil and Mexico — representing roughly two-thirds of the total GDP of Latin America, he said. Regulators in those countries launched new payments initiatives aimed at modernizing their respective banking systems.

The top-down, mandate-driven approach has been focused on boosting competition while lowering transaction costs, increasing transaction security and fostering wider financial inclusion. Beyond the commonality of the goals, the governments in Brazil and Mexico took different approaches to get there.

Similar Goals, Differing Approaches

Brazil, for its part, introduced the Pix real-time payments network. Mexico’s innovations have included a peer-to-peer (P2P) network and a digital collection capability underpinned by QR code technology.

“In both countries, these innovations are improving [payments] speed, visibility and the overall user experience,” Moussalli said.

Against that backdrop, the adoption of real-time rails and new payment modalities has, in some cases, exceeded expectations, but there is still a robust greenfield opportunity, he said.

By way of example, in 2020, Pix’s first year, the network captured 16% of Brazil’s electronic payments volumes; that tally has grown to 40% as recently as this year. Mexico’s real-time payments network has grown 6% year on year as measured in 2024, with 60 million individuals using the network, although the QR codes and P2P networks have notched less adoption than originally anticipated.

The trend is inexorable, however. Although some businesses have been hesitant to pivot more fully to these new payment modalities and may cling to traditional methods such as cash, as time goes on, “it’s going to be hard to do business in Mexico or Brazil” without connecting to these rails, Moussalli said.

“They’re going to miss out on opportunities if they don’t adopt new digital payment options,” he said.

That’s especially true in commercial payments, where suppliers will increasingly demand to be paid in real time.

Asked by PYMNTS about how traditional financial institutions can help enterprise clients embrace change, Moussalli said Bank of America launched support for QR codes, which clients can access through the CashPro banking platform. Clients scan codes from paper or electronic invoices, and within seconds the platform retrieves the invoice details from the beneficiary bank and displays those details for review and confirmation of payment.

“This dramatically speeds up the payments process” beyond the confines of paying suppliers and into the realm, for example, of mandatory transactions that companies make for employees’ retirement benefits, Moussalli said. That “helps eliminate bureaucracy in processing payments.”

The feature has been so well-received in Brazil that it is being explored for use in Europe, he said.

Although regulators initially drove innovation in financial services in Brazil and Mexico, the central banks are well connected to their respective markets and are working with banks and merchants to foster the shift to digital transactions, Moussalli said. Cash withdrawals from banks have plummeted in the double digits. There’s particular promise in pivoting to digital payments in Mexico where cash is still tied to 85% of all retail transactions, especially for transactions below the U.S. dollar equivalent of $50.

“The impact of these changes is ongoing,” said Moussalli, adding, “there’s no going back.”