WhatsApp Returns Disappointed After RBI Bars Launch Of Payments In India RBI has told Supreme court that WhatsApp is not compliant with data localisation norms and has directed NPCI to stop full-scale launch of WhatsApp Pay in India

By Shreya Ganguly

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After a year of a long tussle between the Indian authorities and Facebook-owned messaging app WhatsApp, the company could not gain the trust of Indian officials for launching its payment service in India. In the latest development, Reserve Bank of India has told the Supreme Court that the company is not compliant with data localisation norms.

According to media reports, the central bank has also asked NPCI to not allow a full-scale launch of WhatsApp Payments in India. This move comes in right after it was reported that the Indian government is looking to discuss with RBI and the NPCI about the risks of allowing social media companies to offer online payment services.

Entrepreneur India has reached out to NPCI for comment and we will update the story as soon as we hear from them. WhatsApp has no comments on this development.

Related Story: Will Launch Of WhatsApp Pay Get Delayed Due To Concerns Over Spyware Attack?

WhatsApp's Trouble In Launching Payment Service In India

The launch of WhatsApp Payment has been delayed for over a year after the Indian government said that the service can only be launched after WhatsApp complies with the localisation norms and also opens an office in India and hires team here.

While the company was reportedly planning to have an office in India and also hired Abhijit Bose as its India head, the company is not yet compliant with Indian norms, according to RBI.

RBI's response comes in after the SC had directed RBI in August to examine and report if WhatsApp Payments fulfilled the data localisation requirements. RBI was expected to submit its response by November 29, 2019.

For the uninitiated, RBI's data localization norm mandates all payments companies operating in India to store the user data locally in Indian servers. Last year, the social media company had said that it has built a system to store data of Indian users locally however NPCI said that the move was not enough. According to reports, NPCI said that the company did not clarify if the users' payment data will be stored "only" in India or will it be kept overseas as well. Thus, data mirroring will not be enough for complying with localisation rules.

Did The Israeli Spyware Controversy Worsen The Situation?

In the latest privacy-related controversy, reports revealed that spyware "Pegasus' snooped into the phones of 1,400 people across the world earlier this year through WhatsApp. The Facebook-owned messaging platform had filed a case against Israel-based surveillance firm NSO Group in the federal court, accusing them of allegedly being involved in the breach.

According to WhatsApp, the company came across the cyberattack in May this year where its video calling feature was being compromised to send malware to users. According to media reports, through this attack, NSO helped the government spies get access to the phones of 1,400 users across four continents. The targets were mainly diplomats, political dissidents, journalists and senior government officials. "This attack was developed to access messages after they were decrypted on an infected device, abusing in-app vulnerabilities and the operating systems that power our mobile phones," WhatsApp said in a statement.

Following this, the central government asked WhatsApp to explain how the spyware Pegasus was used to spy on Indian users. However, according to reports, WhatsApp claimed it had informed government officials about the breach in May, refuting allegations about having kept it a secret.

What Does This Mean For Indian Payment Space

As of July 2019, WhatsApp had recorded over 400 million users in India. Earlier this year, a survey by social and consumer research agency AudienceNet revealed that WhatsApp is the most preferred social media app in India.

Due to this huge popularity, WhatsApp Payments could have been a major push for the Indian digital payments space. With the government's aim for Digital India, the launch of WhatsApp payment in India could have bolstered the adoption of online payments.

At the same time, lack of security in social media platforms is a great threat to the users. At a time when social media companies such as WhatsApp, Facebook, Twitter etc have been pulled up several times across the globe for not protecting user data, it is plausible to understand government's strict stand on data safety and consider the associated risks for financial data.

Shreya Ganguly

Former Features Writer

Covering startups and investments for Entrepreneur India. Previously a startup correspondent at Inc42. Reach out to me with interesting story ideas at sganguly@entrepreneurindia.com. 

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