Explained: Significance of WhatsApp Pay’s NPCI clearance

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What does this mean for WhatsApp?

As a result of this clearance from NPCI, WhatsApp will be able to add 60 million users to its UPI service and take on heavyweight rivals such as Walmart-backed PhonePe and Google Pay, which command a majority of the transactions that happen on UPI. However, the NPCI has ensured that WhatsApp’s ability to skew the level-playing field is limited given that the messaging app has over 500 million users and granting it permission to offer UPI service to all the users at once could impact competition. The company, on its part, though, is learnt to have asked NPCI’s permission to expand its payments to all of its users without a cap. “Since our initial approval from NPCI, we have been working to deliver a simple, reliable and secure experience for WhatsApp users that we hope will accelerate adoption of UPI for the “next five hundred million” Indians,” Mahatme said.

What does the move mean for other players in the UPI ecosystem?

The NPCI has mandated that no platform should handle more than 30 per cent of total transaction volumes of UPI on a three-month rolling period basis. However, for bigger players like PhonePe, which commanded a 49 per cent market share in terms of value of transactions in March and Google Pay, which had a 35 per cent market share, it has allowed them time until the end of 2022 to comply with the directive. So, even as these players could continue commanding a significant market share till the end of this year, the increasing clearance to WhatsApp and the mandate for the others to restrict their share could result in a less skewed market.

How has WhatsApp fared so far?

According to payments industry executives, WhatsApp is yet to aggressively push its payments service to merchants. And that, along with a restricted user base has meant that WhatsApp Pay has been off to a sluggish start. In March, it accounted for only 0.05 per cent of UPI transactions translating to 2.54 million transactions worth Rs 239.78 crore. In comparison, PhonePe, the leader in the space, recorded 2.5 billion transactions in the same month followed by Google Pay, which saw 1.8 billion UPI transactions on its platform. But with the fresh extension, WhatsApp Pay could start pushing its service to onboard more merchants on the platform. Notably, WhatsApp’s Mahatme indicated that the platform could push its payments service in rural regions of the country. “UPI has been an unquestioned success, and we believe there is an opportunity for UPI to have even greater impact for the country — especially in rural regions where digital and financial inclusion can significantly improve peoples’ lives,” he said.

What has been WhatsApp Pay’s journey in India?

The company has been entangled in legal and regulatory tussles with entities including RBI, NPCI and even the Ministry of Electronics and Information Technology to launch its UPI-based payments service to its entire customer base. After it was allowed to pilot test its product in February 2018 with 1 million customers, WhatsApp was subjected to various demands from these entities such as data localisation, presence of a local grievance officer and having domestic offices. The company was able to meet the data localisation rule issued by the RBI, as per an audit report WhatsApp submitted to the NPCI. A case was also filed against WhatsApp at the Competition Commission of India alleging abuse of its dominant position to launch WhatsApp Pay in India but the antitrust panel dismissed the case.In November 2021, the NPCI had allowed WhatsApp Pay to double its user base from the previous limit of 20 million.

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What’s next in the UPI pipeline?

It is projected that in the next 3-5 years, UPI would be processing a billion transactions a day, and to enable that, a number of initiatives have been introduced. Chief among these is UPI’s AutoPay feature, which has already seen increased adoption owing to RBI’s disruptive guidelines on recurring mandates. According to industry experts, the AutoPay feature will be crucial to increasing daily transactions on the platform. The RBI has also announced UPI on feature phones without an Internet connection, which is expected to open up the payments system to more than 40 crore individuals who use such devices. This will expand digital financial inclusion and add to the number of transactions made on the platform.

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