UPI-Alipay tie-up raises strategic questions

IN February this year, reports emerged of discussions to link China's Alipay+ platform with India's Unique Payments Interface (UPI) to facilitate easier financial transactions for Indian tourists in Indian rupees. If it materialises, this partnership will mark a significant growth in the global portfolio of both platforms. It also illustrates how India's transnational ambitions must invariably navigate and contend with the phenomenon of Global China.

Alipay in China

Alipay+ — the global arm of Alipay, founded in 2004 by China's Alibaba group — claims to have 1.8 billion customer accounts globally, with over 150 million merchants in more than 100 countries.

In the last two decades since its founding, Alipay has grown exponentially in China with the emergence of mobile Internet technology. Integrated into retail, dining, transportation and government services, the platform, along with Tencent's Weixin Pay, is a fixture in people's daily lives and businesses.

In the last two years, the Chinese government has also enhanced measures to make the digital payment ecosystem easier for international visitors, pushing Alipay to adopt measures such as multilingual support, linking overseas payment wallets and simplifying the registration process.

It is important to note that Alipay's increasing profile has also been calibrated and facilitated under the strict control of the Chinese Party-state. Under the "common prosperity" campaign since 2021, Chinese fintech firms came under tight regulatory scrutiny, leading to a sweeping business overhaul of the Ant Group's business.

Post the revamp, the company came under greater regulatory oversight, its board reorganised and founder Jack Ma's stakes considerably reduced. Alipay itself was restructured into separate business groups, focussing on payments and broader consumer services.

Thus, while China's central government exerts leverage over big tech to align them with national goals — like controlling data, maintaining stability and achieving geopolitical competitiveness — Chinese local governments engage with platforms like Alibaba in a more cooperative and instrumental way, with the purpose of regional economic development.

UPI in Alipay network

Overseas travel by the Chinese provided the impetus for Alipay's global expansion, leading to partnerships and collaborations with financial service providers and western platform-based services. Alipay+ is more prominently visible in East and Southeast Asia.

It is not surprising then that the ever-increasing overseas travel by Indians — clocked at 3.27 million in 2025 according to India's Annual Tourism Snapshot — has encouraged the Central government to champion the global adoption of UPI and to enter into international partnerships.

One of the central pillars of the Digital India initiative, UPI, is used by more than 504 million users and 65 million merchants, accounting for 84 per cent of the country's digital retail payments.

While the UPI is present in seven countries at present, there remain limitations on its global interoperability, such as transaction limits for high-value payments, availability of stable internet, need for country-specific regulatory integration and ability for last-mile connectivity.

For instance, while it is claimed that Sri Lanka has been added to the UPI's global map, I could not find it in my travels in the country recently, including in Colombo. Local retailers and tourism-related vendors neither had adequate knowledge nor the confidence to integrate to the platform, thus illustrating the need for concentrating on follow-up and finer details on the ground.

Alipay, by contrast, is available more easily in Sri Lanka.

It is noteworthy that the Indian interest in Alipay comes soon after the Ant Group had completely exited its partnership with popular Indian fintech company Paytm in August, 2025.

Ant had come on board as an investor with a nearly 40 per cent stake in Paytm in 2015, but the Galwan crisis in 2020 and the ensuing regulatory scrutiny of Chinese investments forced the Ant Group towards a complete exit, with the process commencing in 2021. The group also completely divested all its stakes in Eternal, the parent company of Zomato and Blinkit platforms.

A journey into the unknown

Even though the partnership is far from being a done deal, UPI's intended global journey on the coattails of Alipay also raises questions about interoperability, data security and efficacy. India has strict rules that payment data needs to be stored within the country and, therefore, cross-border payment systems should guarantee local storage and auditing.

UPI and Alipay operate differently — while the former has open infrastructure with many apps and real-time bank-to-bank transfer, the latter has a closed wallet ecosystem and does not allow easy foreign system access, thus limiting interoperability.

Cross-border payments also raise issues of forex conversion, such as the entity that does the conversion, settlement timing differences and compliance with regulatory restrictions in both countries to protect national currency as well as prevent illegal activities like money-laundering.

Moreover, the mutual distrust hardwired into India-China bilateral relations will inevitably cast its shadow on the long-term working of the partnership. This will be a significant challenge, considering both platforms are integral to the political economy of their respective countries and are showcased to burnish national identity.

At the same time, the fact that this proposed tie-up comes alongside New Delhi's decision to amend Press Note 3 to ease investments from countries sharing land borders with India — a 2020 decision perceived to have been aimed at China — signifies the indispensability of Chinese capital, technology and reach in India's economic and digital transformation.