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WhatsApp Pay’s tussle with India is turning out to be a cautionary tale

Written by Moulishree Srivastava Published on   3 mins read

WhatsApp has said it’s in the process of complying with the local laws, but so far India is not impressed by the efforts.

Facebook-owned instant-messaging app WhatsApp’s plan to roll out payments business in India, has yet again been blocked by India. Country’s apex bank, the Reserve Bank of India (RBI), has denied the US-based app from rolling out its payments service as it has failed to adhere to India’s data localization norms.

WhatsApp has been struggling to tap India’s USD 200-billion plus digital payments industry for the past two years. It had launched a pilot in February 2018 which was limited to 1 million users and was expecting to launch a full-fledged service by this year-end. On multiple occasions, WhatsApp has said that the company is in the process of complying with the local laws, but so far India is not impressed by its efforts.

In April 2018, RBI had 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. Earlier in June, the banking regulator further clarified that while there is no restriction on the processing of payment transactions outside India, the data after processing needs to be stored only in India so that it can be accessed for handling customer disputes, whenever required.

In August, 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 this year.

In its response, 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,” local media Economic Times reported.

The report also states that RBI has advised the National Payments Corporation of India (NPCI), an umbrella organization of retail-payment operating systems, “not to permit WhatsApp to go live for full-scale operations on UPI payments system, till the time they are fully compliant.”

This comes at a time when WhatsApp is involved in a heated controversy with the Indian government over non-disclosure of a spyware attack in April and May on its users, which included local journalists and activists.

While the company said, in May it had notified Indian authority CERT-IN, the Indian Computer Emergency Response Team, senior government officials said the company did not clarify that Indian citizens were affected by it. Following the news outbreak, the government reached out to NPCI and RBI to raise concerns regarding data security in WhatsApp Pay and discuss risks in allowing social media companies in India digital payments space.

Meanwhile, rival Amazon Pay and Google Pay, both of which are in the process of complying with the data localization norms, are aggressively expanding their foothold in India. They have been locking horns with local payment companies such as Alibaba and SoftBank-backed Paytm as well as Walmart-owned Phone Pe to grab a bigger pie of India’s digital payment opportunity, which is set to cross USD 1 trillion by 2023.

On its part, WhatsApp hasn’t been able to tap the Indian online payments market, thus failing in its plans to take a step forward towards monetizing its largest market with 400 million users.


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