WhatsApp Pay To Start UPI-based Payments in India and What it Means For Other Payments Players NPCI has allowed the messaging app to roll out the facility with only 20 million users initially

By Shipra Singh

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After a tumultuous three years of fighting the regulatory battle and addressing security concerns in beta mode, WatsApp Pay, the UPI-based payments service, has finally got a nod from National Payments Corporation of India (NPCI) to go live in India.

However, NPCI, the umbrella organization for all retail payments system in India, has allowed the messaging app to roll out the facility with only 20 million users initially.

This limit has been increased from the 1 million cap which was imposed in the beta mode on February 2018.

This development comes on the same day when NPCI also announced a 30 per cent cap on total payments volume made through a single third party app (TPA) on UPI. This will kick in on January 1, 2021 and TPAs will get two years to comply.

NPCI said this move aims to address "the risks' as the UPI ecosystem further scales up. It is widely reported that NPCI had been mulling over this decision since a long time to ensure that no one payments provider or a handful of players control the market share.

Though no official data is available on the share of different payment providers in UPI transaction volume, reports show that Flipkart-owned PhonePe and Google's Gpay account for about 80 per cent of the total share. NPCI's app BHIM contributes a little over 1 per cent, as per data available on NPCI website.

Both these announcements come on the heels of UPI crossing 2 billion transactions in a single month for the first time.

The Long Road for WhatsApp Pay

WhatsApp Payments has been surrounded by controversies ever since it was allowed to start as a beta app in February 2018.

The Facebook-owned messaging app first faced heat from the Reserve Bank of India over violating the country's data localization norms. The central bank's data localisation norms require foreign companies to store transaction and user data inside India and delete the data from foreign servers within 24 hours.

In October 2019, WhatsApp was caught in the Pegasus Spyware dispute with the government, which stood as a major roadblock in the messaging app getting a clearance on the data localization norms.

In between, violation of RBI's two-factor authentication system and concerns over data security and privacy of users were some of the other obstructions in the messaging app's way of making it into India's digital payments ecosystem.

What Does it Mean for Gpay and PhonePe

Entrepreneur India had earlier reported that WhatsApp Pay has the potential to become the WeChat of India for small businesses.

Launch of WhatsApp Pay along with its existing catalogue service on its standalone business platform and easy-to-use user interface will allow for a seamless, end-to-end experience for users.

Moreover, earlier this year the messaging app had partnered with JioMart to create hyperlocal delivery network by connecting small businesses and Kiranas on JioMart with customers using WhatsApp. This alliance will give a major fillip to WhatsApp Pay as users will be able to place grocery related orders and simultaneously settle payments on the same platform.

As for peer-to-peer transactions, WhatsApp has become a household name in the country so the added feature of making payments while texting with a single click without the need to exit the platform will be a major convenience point that will drive faster adoption.

Other players like PhonePe and Google Pay, which pre-dominantly cater to P2P transactions, have long feared the launch of WhatsApp Pay as the latter can quickly eat into their market share with its existing 400 million user base in India.

NPCI's move to implement 30 per cent cap on total volume will definitely help these players from losing out a majority of their digital payments share to WhatsApp Pay.

Shipra Singh

Entrepreneur Staff

Freelance Journalist

Now a freelance journalist, ealier steered the Wealth section on the Entrepreneur website, covering everything finance. Previously a personal finance reporter at The Economic Times and Outlook Money.

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