Facebook-owned messaging app WhatsApp has received approval from National Payments Corporation of India (NPCI) to go live on its Unified Payments Interface (UPI) service. Even though NPCI has only allowed the platform to scale its user base up to 20 million registered users from the 1 million currently, the green light means that cap will be subject to review by NPCI at a later stage. However, WhatsApp will be subject to a cap on transactions conducted on the platform at 30% of total UPI volumes from January 1 following new rules issued by the NPCI for all service providers. This cap on number of transactions was first discussed at NPCI more than a year ago, to keep in check the growing dominance of non-banking payments providers like Google Pay, PhonePe, etc in the UPI ecosystem.
What does the clearance mean for the UPI ecosystem?
India’s UPI ecosystem is flooded with numerous players including payment service provider banks and third-party application providers such as Alibaba-backed Paytm, Flipkart-owned PhonePe, Google Pay, Amazon Pay, among others. WhatsApp has been operating in the space with a 1-million customer cap for the last two years, and clearance from NPCI means the messaging platform can scale its presence up in a segment that is controlled in majority by just two players.
What does the clearance mean for WhatsApp?
First and foremost, the clearance will allow WhatsApp to offer service to 20 times as many users as it does now and this will assume significance in its plans to capitalise on its association with Reliance Industries. Reliance Jio’s grocery delivery service, JioMart, allows users to make orders through WhatsApp and with a payments service, the integration between the two platforms could see further augmentation.
Who can use WhatsApp Pay?
Eventually all of WhatsApp’s users with a bank account and a debit card in one of the 160 banks participating in UPI will be allowed to use the payments service but as of now NPCI has restricted the user base to 20 million out of WhatsApp’s over 400 million. Given that WhatsApp is a non-banking payments service provider, it has tied up with five banks to enable the service — ICICI Bank, HDFC Bank, Axis Bank, State Bank of India, and Jio Payments Bank. 📣 Express Explained is now on Telegram
How do payments on WhatsApp work?
To send money on WhatsApp in India, it’s necessary to have a bank account and debit card in India. WhatsApp, like Google Pay or PhonePe, sends instructions to banks, also known as payment service providers, that initiate the transfer of money via UPI between sender and receiver bank accounts. People can send money on WhatsApp to anyone using a UPI supported app.
What has been the journey of WhatsApp’s payment service?
The company has been entangled in legal and regulatory tussles with entities including RBI, NPCI and even the Ministry of Electronics and Information Technology to launch its UPI-based payments service to its entire customer base. After it was allowed to pilot test its product in February 2018 with 1 million customers, WhatsApp was subjected to various demands from these entities such as data localisation, presence of a local grievance officer and having domestic offices. The company was able to meet the data localisation rule issued by the RBI, as per an audit report WhatsApp submitted to the NPCI. A case was also filed against WhatsApp at the Competition Commission of India alleging abuse of its dominant position to launch WhatsApp Pay in India but the antitrust panel dismissed the case.
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Does the 30% cap announced by NPCI impact WhatsApp’s rollout?
The 30% cap announced by NPCI for third-party application providers stipulates that any of these platforms should not handle more than 30% of total transaction volumes of UPI on a three-month rolling period basis. This would impede WhatsApp from growing beyond that point even if it was allowed to roll the service out to all of its 400 million+ customers. Other apps like PhonePe and Google Pay, the market shares of which exceed 30% in terms of transaction volumes have been given time till 2023 to comply with the norms.
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