Updated: November 12, 2020 9:42:00 AM
Facebook-owned messaging application WhatsApp has received approval from the Indian National Payment Company (NPCI) for marketing in the Unified Payments Interface (UPI). Although the NPCI has allowed the platform to expand its user base to 20 million registered users out of 1 million at present, the green light means that the restriction will be subject to NPCI control at a later stage. However, from 1 January, WhatsApp will be subject to a 30% limit on transactions made on the platform from the total UPI volumes under the new rules issued by the NPCI for all service providers. This limitation on the number of transactions was first discussed at the NPCI more than a year ago in order to control the growing dominance of non-bank payment providers such as Google Pay, PhonePe, etc. in the UPI ecosystem.
What does will mean for the UPI ecosystem?
India’s UPI ecosystem is flooded with a number of players, including banks of payment service providers and third-party application providers, such as Alibaba-supported Paytm, Flipkart-owned PhonePe, Google Pay and Amazon Pay. WhatsApp has been operating in an area of 1 million customer limits over the last two years, and permission from the NPCI means that the messaging platform can expand its presence in a segment that is usually controlled by only two players.
What does permission mean for WhatsApp?
In the first place, the permit will allow WhatsApp to offer services to 20 times more users than it does now, and this will be important in its plans to capitalize on its merger with Reliance Industries. Reliance Jio’s food delivery service, JioMart, allows users to place orders through WhatsApp, and through a payment service, integration between the two platforms could see further expansion.
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Who can use WhatsApp Pay?
Eventually, all WhatsApp users with a bank account and debit card in one of the 160 banks participating in UPI will be able to use the payment service, but the NPCI has now reduced its user base to 20 million from more than 400 million WhatsApp. As WhatsApp is a non-bank payment service provider, it has established links with five banks to enable this 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 to WhatsApp in India, you must have a bank account and a debit card in India. WhatsApp, such as Google Pay or PhonePe, sends instructions to banks, also known as payment service providers, that initiate the transfer of money through the UPI between the sender’s and recipient’s bank accounts. People can send money to WhatsApp to anyone using a UPI-supported application.
What was the path of the WhatsApp payment service?
The company has been embroiled in legal and regulatory difficulties with entities including the RBI, NPCI and even the Department of Electronics and Information Technology to launch its UPI-based payment service for the entire customer base. After being piloted with 1 million customers in February 2018, WhatsApp was exposed to various requirements from these entities, such as data localization, the presence of a local complainant and a home office. The company was able to comply with the data localization rule issued by the RBI according to the WhatsApp audit report submitted by the NPCI. A case was also brought against WhatsApp before the Indian Competition Commission, alleging abuse of its dominant position to launch the WhatsApp Pay application in India, but the antitrust panel dismissed the case.
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Does the 30% limit reported to NPCI have an impact on the implementation of WhatsApp?
The 30% limit reported to the NPCI for third-party application providers states that none of these platforms should process more than 30% of the total UPI transaction volumes on a three-month rolling period. This would prevent WhatsApp from growing beyond this point, even if it were allowed to service all its 400 million or more customers. Other applications, such as PhonePe and Google Pay, whose market shares exceed 30% in terms of transaction volume, have been given until 2023 to comply with the standards.
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