In its recently released Payments System Report (H1 2025), the Reserve Bank of India (RBI) has sounded a red alert: geopolitical tensions are emerging as a key threat to cross-border payments.
What’s Going On?
The RBI points to the centralised nature of global financial infrastructure and the heavy dependence on a handful of settlement currencies. In its words:
“Sanctions, restrictions on financial systems or currencies, and other operational barriers can disrupt markets and access.”
This means that international conflicts, sanctions regimes, trade embargoes or currency restrictions could suddenly hamper how money flows across borders, including remittances, business payments and trade settlements.
Key Risk Areas
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Settlement Currency Concentration: Many cross-border transfers still rely on major currencies (USD, EUR) and settlement platforms. A disruption in those channels has knock-on effects.
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Legacy and Fragmented Systems: The report notes that long transaction chains, multiple intermediaries, legacy platforms, and fragmented data standards reduce efficiency and increase the chance of disruption.
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Regulatory / Operational Barriers: Sanctions or restrictions applying to certain countries can impair access to platforms for payments, making corridors less reliable.
Where India Stands
India remains the world’s largest recipient of remittances, with inflows of about US$137.7 billion in 2024. The RBI sees this as a strength but also a vulnerability: the reliance on remittances means disruptions in payment corridors could impact millions.
On the positive side, India is taking steps to build resilience: for example, linking its domestic fast payment system (UPI) with other countries, and joining multilateral initiatives.
Why Home Buyers, Businesses & Investors Should Care
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For Businesses: Exporters, service providers, and firms with foreign transactions may face higher costs or delays if payment corridors are affected.
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For Diaspora / Remitters: Migrant workers and families in India who depend on remittances may see slower transfer times or higher costs if corridors are disrupted.
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For Tech & Fintech: Payment-service providers and fintech firms must consider geopolitical risk in their infrastructure planning — diversifying corridors, settlement options, and currencies matters.
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For Investors: Financial services companies, payment platforms, and cross-border fintech are exposed — their risk profiles change when geopolitics enters the realm of payments.
What’s Next / What to Watch
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Will the RBI recommend specific policy or regulatory changes to bolster cross-border payment resilience?
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Will India deepen ties with alternative payment networks or currencies to reduce dependency on traditional systems?
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How will fintechs and remittance platforms adjust their business models to account for rising geopolitical risk?
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Will sectors reliant on cross-border flows (IT services, exports, migrant remittances) begin to factor in higher payment-risk premium?
Conclusion
The RBI’s warning is timely and important: payment flows are no longer about just technology or cost—they are now entwined with geopolitics. For an economy as connected as India’s, where cross-border payments matter for remittances, trade, and services, the signal is clear: build resilience, diversify corridors, and prepare for an era where global politics may influence even how money moves.
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