After two years of toil and turmoil, American social media giant Facebook-owned chat platform WhatsApp has received the Indian government’s approval to roll out its digital payments service WhatsApp Pay for masses.
It essentially means WhatsApp, which has over 400 million users in India, is now a formal contender to big-wigs like Alibaba and SoftBank-backed Paytm, Google Pay, Amazon Pay, and Walmart-owned PhonePe, which have been locking horns over grabbing a bigger pie of the South Asian nation’s over USD 200 billion digital payments market, which is projected to explode to reach USD 1 trillion by 2023.
Being the most popular chat app in the country, WhatsApp reach is far better than its rivals. Its closest competitor Paytm claims to have140 million monthly users.
Citing a source from Reserve Bank of India (RBI), the country’s apex bank, local media Business Standard, on Friday, reported National Payments Corporation of India (NPCI), a government-backed umbrella organization of retail-payment operating systems, has permitted WhatsApp “to operate its digital payment service in a phased manner.”
Since 2018, WhatsApp Pay has been running a test run with one million users of its 400 million user base in India. It could not roll out its service for the masses as it got entangled in India’s regulations and data compliance rules that mandate all companies to store user data in the country.
The report said NPCI’s approval follows a “go-ahead” by RBI after WhatsApp assured regulators that it would comply with the data localization norms. To begin with, the report said, WhatsApp will be able to offer payment services to 10 million users in India.
“Pending other compliance points, the messaging platform will be able to do a full rollout,” the report added quoting the source.
In April 2018, two months after WhatsApp Pay launched its pilot, RBI issued a notification on data localization, mandating service providers to store Indian consumers’ payment-related data within the country. This includes end-to-end transaction details and information collected and processed as part of the payment instructions among other things. In August 2019, India’s Supreme Court took cognizance of a petition filed by a think-tank, Centre for Accountability and Systemic Change, and asked RBI to submit WhatsApp’s data localization compliance report before November 29 last year.
In its response, late last year, RBI informed the Supreme Court that WhatsApp is storing payment data elements such as transaction ID, expiry of collect request, and retrieval reference number, outside India “beyond the permitted timelines,” as per the local media reports. Consequently, while the company said it was in the process of complying with them, RBI denied the US-based app from rolling out its payments service as it had failed to adhere to local norms. It advised NPCI to not permit WhatsApp to go live for full-scale operations till the time they are fully compliant.
Now that WhatsApp has finally gotten a green signal in its largest market, the digital payments space, where most of the companies are still losing money in wooing customers to come online and transact, is set to see more action.
Experts in the industry say, combining instant payment feature with a popular chatting platform is going to be revolutionary as users won’t have to use a different app for payment since WhatsApp is already a household name in India. It has a huge user base not only in the metro cities but in tier 3 and 4 cities where new users have come online due to cheaper internet data packs.
To prepare itself for such an eventuality, PhonePe recently embedded a chat feature in its payment app allowing its users to transfer money and confirm the receipt without leaving the app. Similarly, Paytm had also tried something similar but shut down the chat feature citing high cost in doing so.