India may finally give a nod to Facebook-owned WhatsApp to start its digital payment service, albeit in a calibrated manner, which means only certain users would be allowed to use the service during a given period of time.
Before giving WhatsApp Pay approval to start the service, the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) are checking if the country’s digital payments ecosystem needs tighter regulatory oversight, according to a report by the Economic Times.
The report said ongoing data privacy and antitrust issues have promoted India’s central bank to examine the need for a tighter regulatory oversight.
Experts said that tech companies like Facebook could possibly violate privacy rules and monetisation customer data that they already possess through platforms like WhatsApp which has deep penetration in India.
WhatsApp, which received clearance for testing for its payment service in early 2018, recently said that it fulfilled NPCI’s mandated data localisation laws in India. It, however, is still awaiting the final nod from the RBI.
WhatsApp India’s head of operations Abhijit Bose last week told Business Standard newspaper that the company is keen to launch WhatsApp Payments and will continue to work with the government, local banks, and other institutions to understand their requirements.
WhatsApp Pay will take on established UPI-based digital payments service providers Google Pay, Walmart-Flipkart’s PhonePe, Alibaba-backed Paytm, and Amazon Pay. Google Pay is currently the market leader with 40% share, followed by PhonePe.
There are 21 companies that offer UPI-based digital payments service through their applications in India, as per the NPCI website. All these companies launched a separate app for the payment services, so they had no users to begin with, and also claimed they do not have access to any personal information and that all transactions are encrypted.
However, WhatsApp hasn’t announced a separate application for payment service, leading to data privacy and monetisation related concerns in the market.
The market regulator, as per the ET report, wants to ensure if these companies could start using their algorithms to map consumer data, consumption habits and begin advertising.
“Could this [WhatsApp Pay’s entry] lead to antitrust issues? What regulations are required to avoid misuse or abuse by existing players and new entrants with the immense amount of personal data generated? — these are some of the concerns which are being studied and worked upon by the central bank and the NPCI,” a person was quoted as saying by the Economic Times.
Both RBI and NPCI are also looking into technology inadequacy of Indian banks, which is resulting in high rates of transaction failures and a pile-up in credit reversals, the report said.
In India, around 100 million use NPCI-operated Unified Payments Interface (UPI) to executive digital transactions. WhatsApp’s possible entry may dramatically increase the overall UPI subscriber base, which may put additional burden on banks’ digital infrastructure.
WhatsApp has 400 million users in India and it is expected that “a bulk of them” could switch to WhatsApp Pay as soon as the service is launched. “Will the UPI platform be instantly able to handle this load?,” the person told ET.