WhatsApp Pay gets green light from Indian regulator

By Sunniva Kolostyak

WhatsApp has received regulatory approval to go live with its payments feature WhatsApp Pay, using the Unified Payments Interface (UPI) to allow account-to-account transactions.

The National Payments Corporation of India (NPCI) gave its approval to the Facebook-owned messaging platform after months of regulatory hurdles related to data localisation and data privacy.

This means WhatsApp Pay will be able to launch UPI payments, an Open Banking equivalent – however, it will only be allowed to extend the service to 20 million of its 400 million registered users in the region.

The approval comes on the same day as NPCI, the umbrella body of all retail payments in the country, announces a volume cap of 30 per cent for third party app providers from 1 January 2021. This is due to the growth in UPI payments, which has reached 2 billion transactions a month.

The cap will be calculated looking at the total volume of transactions processed in UPI during the preceding three months, and providers exceeding the specified cap will have a period of two years from January to comply.

However, this is not good news for consumers in India or the rest of the world, Sheila Kagan, CEO of PayKey, stated, due to Facebook’s market position and poor reputation.

“WhatsApp Pay getting the green light in India is very bad news for consumers in the country, and should be a wake-up call for the rest of the world,” Kagan said. “Big Tech, and Facebook in particular, have repeatedly shown they cannot be trusted to use personal data in a beneficial or ethical way, so why should it be any different with personal financial data?”

Commenting on the announcement, she noted that WhatsApp has a near-monopoly in messaging in India, and even with an initial ‘graded’ introduction, the go-ahead has opened the door to Facebook dominating payments, e-commerce and wider financial services in the country from its unfair market position. This will leave the Indian consumer as the ultimate loser.

The PayKey CEO said control of financial data must not be ceded to the tech giants without a fight, as for BigTech, personal financial data only serves to increase people’s screen time and harvest information to sell to advertisers.

“This should be a major wake up call for the Indian banking sector. Big Tech tanks are parked on their lawn and they don’t even realise, and in fact, they are cooperating. Urgent innovative leaps forward are needed to offer consumers viable alternative owned-banking options, and to stem the march by stealth of the tech giants into financial services.”

On the other hand, the good news is that banks have consumer trust on their side, so if they up their innovation game quickly and significantly, they may be pushing on an open customer door.

“Pressure needs to be put on regulators to review their decision and, at the very least, ensure tech companies are subject to the same level of strict oversight as traditional banks,” Kagan concluded.