The education landscape has been reshaped by the forces of globalisation. Boundaries have dissolved, offering students the unprecedented prospect of pursuing education from any corner of the globe, thereby transforming their aspirations into reality. Our era is defined by the ubiquity of the internet, granting us unlimited access to knowledge irrespective of geographical confines.
Today, a growing number of students are considering pursuing education abroad. Their motivations extend beyond academic achievement, encompassing a keen interest in engaging with diverse cultures and experiencing living in different countries. Highlighting this trend, data from the Ministry of External Affairs underscores that, in 2022, over 1.3 million Indian students were enrolled across 79 countries globally. Prominent among these destinations are the United Kingdom, the United States of America, Australia, Canada, Ireland, the United Arab Emirates, and Germany. The wide array of courses combined with the opportunity to access advanced resources and research facilities, fuels this international academic movement.
As the tide of students gravitating towards foreign shores rises, so does the demand for seamless cross-border payment solutions. Students require efficient mechanisms for remitting funds to cover tuition fees, living expenses, and more. Often, parents seek rapid, hassle-free money transfers. While studying abroad is a transformative experience, prudent financial management is also important. Strategies such as budgeting, capitalising on student discounts, utilising Forex cards, and activating card controls can empower Indian students to navigate their finances abroad.
Differing regulations
Each country has its own set of rules and different exchange rates and it is difficult for students to navigate diverse regulatory frameworks. For instance, there might be stricter requirements in some countries for verifying the identities of individuals involved in a transaction, which can lead to delay in transactions. Besides, certain countries might have different rules regarding the types of financial products or services that can be offered, affecting the options available to those making cross-border payments. These differences in regulations can make it more complex for both students and financial institutions to navigate cross-border transactions securely and efficiently. Challenges like security, timeliness, liquidity, and transparency occur and overcoming these hurdles requires the implementation of standardised, cohesive approaches to enhance the efficiency of cross-border payments.
Recent developments
Unified Payments Interface (UPI) goes global
India’s digital payment innovation is gaining worldwide attention with the UPI sparking a financial revolution. NPCI has implemented UPI in Singapore and France and growing successfully and is evident from the MOUs signed with 13 other countries including Malaysia, Thailand, Philippines, South Korea, and Japan, who wish to adopt UPI for their digital payments. India is also looking at exploring commercial partnerships between payment platforms in African countries including Namibia, Mozambique and Kenya, and further expand UPI services.
Students going to study in these countries will greatly benefit from these developments. This trend has positively influenced cross-border payments and will ease out payments, especially for students who need remittance from their parents for paying tuition fees or living expenses and do not have to go through many procedures just to get money transferred. This revolutionary system empowers students to make payments across international borders with unparalleled convenience.
The emergence of SWIFT Go
As a cost-effective service for low value cross border payments, SWIFT Go is emerging as a quick, easy and a fast payment system. In the pilot phase, 64 banks are preparing to go live by the end of 2023, while 250 other banks have registered and are interested in using SWIFT Go.
TCS application on educational expenses
Under the Liberalised Remittance Scheme (LRS), the money remitted overseas for the purpose of education attracts TCS at 5% if the amount exceeds Rs 7 lakh. If the source of funding is an education loan, the remittances made for foreign education attract TCS at 0.5%, beyond the Rs. 7 lakh threshold. This makes it crucial for parents and students to understand how TCS is applied differently for expenses and accordingly plan living expenses and tuition fees in a foreign nation.
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Elevated risks of digital fraud
Cross-border transactions are naturally more vulnerable to fraudulent activities compared to domestic ones. This susceptibility arises from the increased complexity of monitoring transactions across international boundaries. For international students, this risk becomes particularly pertinent due to their reliance on money from their home countries to cover essential expenses, including tuition and living costs. With their financial sustenance dependent on these cross-border transactions, it becomes important to safeguard these transactions. Universities, financial institutions, and remittance providers must collaborate to implement robust authentication, encryption, and fraud detection mechanisms to safeguard these transactions. By enhancing security protocols, the financial industry can help ensure that international students’ funds are protected, encouraging their ability to pursue education without falling prey to the threats of digital fraud.
The path forward
With an escalating number of students embracing education abroad, the demand for efficient cross-border payment systems is surging, a trend accelerated by the ongoing wave of digitisation. Notably, India stood out as a top recipient of inward remittances, experiencing a significant 26% growth from $89.1 billion in FY 2022 to $112.5 billion in FY 2023, signaling the escalating importance of cross-border financial flows. Positioned as one of the world’s fastest-growing economies, India stands at the precipice of establishing new platforms and digital infrastructure that could potentially emerge as global benchmarks for effective cross-border financial transactions.