WhatsApp application logo, center, seen on a smartphone screen. File photo: AFP

WhatsApp’s digital payment arm WhatsApp Pay may finally be able to roll out its services in India in a phased manner.

WhatsApp is a messaging platform bought by Facebook a few years ago and has become India’s most preferred service. This is expected to disrupt the country’s digital payments sector, currently dominated by Alphabet’s mobile payments system – Google Pay.

The Facebook-owned messaging service WhatsApp got approval from the National Payments Corporation of India, an umbrella body for operating retail payments and settlements, nearly two years after it began a pilot project in the country, Business Standard reports.

The payments corporation gave approval after the central bank – the Reserve Bank of India – gave it a green light. In October last year, a third-party security audit, endorsed by the central bank, was performed to check WhatsApp Pay for security compliance.

Data localization

WhatsApp has assured both organizations that it will comply with data localization norms. The government wants digital payments firms to store all critical data within India. WhatsApp initially resisted the government’s stand on data localization and that was a key reason behind the delay in the launch of its payment service.

Whatsapp counts India as its biggest market with more than 400 million users and hopes to tap these users while rolling out WhatsApp Pay.

At an earnings call last week, Mark Zuckerberg said WhatsApp Pay was expected to be launched in a number of countries over the next six months. “We got approval to test this [payment services] with one million people in India back in 2018. And when so many of the people kept using it week after week, we knew it was going to be big when we get to launch,” Zuckerberg said.

It will run on Unified Payments Interface platform, a state-run financial payments platform developed by the National Payments Corporation of India. The platform started off with nine banks as members and currently has 140 member banks.

This app platform is also used by other digital payment players such as Google Pay, PhonePe, owned by Walmart and Paytm. It allows bank account holders to send or receive money electronically without entering their net banking user ID or password.

WhatsApp Pay rollout will take place in phases, as the parent organization needs time to localize financial transaction data and also help banks to scale up their systems as users start transacting.

In the first phase, WhatsApp Pay will cater to 10 million users in India. Payments through WhatsApp were introduced to a million users as a part of trial run in February 2018 in a partnership with ICICI Bank.

After the full roll-out, WhatsApp Pay will be pitted against Alphabet’s Google Pay, Walmart-owned PhonePe, Amazon Pay and Alibaba-backed Paytm. These companies are already locked in a fierce battle to dominate the digital payments space in India.

Google Pay

Google Pay is the single largest Unified Payments Interface player in India, with a 60% market share and an annualized transaction value worth US$110 billion, according to data from Razorpay, a payment gateway. PhonePe is second with just under 25%, while Paytm has close to 6%.

Alphabet’s payment system remains one of the most sought after applications in India registered 180 million downloads between its launch in September 2017 and September 2019, and its United Payments Interface transaction volumes have registered a 14.6% month-on-month growth. Google Pay’s monthly active user-base trebled to 67 million in September last year – up from 22 million in the same month in 2018.

According to a Worldline report titled “India Digital Payments Report – Q3 2019”, the total volume of United Payments Interface transactions in the third quarter in India last year touched 2.7 billion, a whopping 183% increase from the same July-September quarter the previous year. In terms of value, UPI clocked 4.6 trillion rupees, up 189% from Q3 2018.

This platform is used by customers for buying train tickets, paying bills and even to purchase lunchtime meals from street vendors. In India, local stores accept digital payments via phone applications.

Interestingly, Google wrote recently to the US Federal Reserve Board about the success of its digital payment platform in India and suggested that the US should build a similar interbank real-time gross settlement service for faster digital payments.

Google claimed it had worked closely with India’s payments corporation and the central bank to build ‘Google Pay’ for the Indian market.

Listing the highlights of the Indian digital platform, Google said it is an interbank transfer system conducted in real-time. And, as it is ‘open’ technology, companies can build applications that help users directly manage transfers from their accounts held at banks.

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