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Mahesh

08/04/22 01:05 AM IST

WhatsApp Pay’s NPCI clearance

  • WHAT
  • WHY
  • WHEN
  • WHERE
  • WHO
  • HOW
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.
WhatsApp UPI in India:
  • People can send money on WhatsApp to anyone using a UPI supported app.
  • India is one of the biggest markets for WhatsApp, which first started testing its UPI-based payments system in 2018 and would now compete with existing players such as Paytm, Google Pay, Amazon Pay and PhonePe.
  • It is working with five leading banks in India viz. ICICI Bank, HDFC Bank, Axis Bank, the State Bank of India, and Jio Payments Bank.
  • However, not all users in India would be able to access payment features because NPCI had mandated expansion of WhatsApp’s UPI user base in a graded manner starting with a maximum registered user base of 20 million.
Why NPCI had imposed a 30% cap on Whatsapp? 
  • The guidelines stipulate any entity not exceeding 30% of the total transaction volume to be in compliance. However, entities exceeding the said market share have been given time till 2023 to comply.
  • The cap will be calculated on the basis of total volume of transactions processed in UPI during the preceding three months on a rolling basis.
  • Seeing the recent growth in UPI transaction volumes, NPCI analysed the risks in the UPI ecosystem and introduced the cap.
  • The idea for a 30% cap on UPI transaction volumes was first brought up in a meeting of the NPCI’s Steering Committee on UPI in 2019 after concerns of rising dominance with non-bank third-party app providers were raised.
  • As of October 2019, Google Pay and PhonePe together had around 80% of transaction volumes in UPI on their platforms.
  • The NPCI is yet to issue the risk assessment of the UPI ecosystem on the basis of which the new norms were brought in and the Standard Operating Procedure (SOP) for the newly introduced restrictions on transaction volumes.
  • Another reason is banks’ concerns about the sudden rise in transaction volumes and the subsequent load on their systems, especially after the introduction of WhatsApp UPI.
  • The move could disincentivize platforms from on-boarding customers of a lower ticket size and in effect, could prevent the efforts to accelerate digital payments.
Other players in 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.
When was WhatsApp Pay introduced?
  •  WhatsApp Pay was launched in February 2018 in India as part of a trial run.
  • Payments through WhatsApp were introduced to a million users under a partnership with ICICI Bank.
  • On February 7, 2020, the messaging app received NPCI's approval to roll out its digital payment service in a phased manner.
  • In the first phase, WhatsApp will offer payment services to 10 million users in the country.
  • Users can send money directly through chat by tapping on the share file icon and selecting ‘payment’.
  • The ‘payment’ section is available on the shortcut menu. Users can check their transaction history and account details in that section.
  • The payment system works on the Unified Payments Interface (UPI) method, where fund transfers can be initiated without having to provide bank account numbers and IFSC codes of recipients.
National Payments Corporation of India
  • It is an umbrella organisation for all retail payments systems in India.
  • It was set up with the guidance and support of the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA).
Objectives:
  • To consolidate and integrate the existing multiple systems into a nation-wide uniform and standard business process for all retail payment systems.
  • To facilitate an affordable payment mechanism to benefit the common man across the country and propel financial inclusion.
Where around the world Whatsapp payment feature is available? 
  • WhatsApp Payments (marketed as WhatsApp Pay) is a peer-to-peer money transfer feature that is currently only available in India.
  • WhatsApp has received permission from the National Payments Corporation of India (NPCI) to enter into partnership with multiple banks in July 2017 to allow users to make in-app payments and money transfers using the Unified Payments Interface (UPI).
  • UPI enables account-to-account transfers from a mobile app without having any details of the beneficiary's bank.
  • On November 6, 2020, WhatsApp announced that it had received approval for providing a payment service, although restricted to maximum of 20 million users initially. The service was subsequently rolled out.
Digisaathi 
  • NPCI said it has set up a 24×7 helpline for information on digital payment products and services, DigiSaathi, on behalf of a consortium of payment system operators and participants comprising banks and non-banking financial entities.
  • DigiSaathi will be accessible on WhatsApp to access all the information customers need related to digital payment products and services.
  • DigiSaathi will assist the users with all their queries on digital payments via the chatbot facility on WhatsApp by simply messaging on +91 892 891 3333.
  • The facility will soon also be available on other social media channels as well.
  • It helps customers in addressing their queries related to debit and credit cards, UPI, NEFT, RTGS, IMPS, PPI wallets, ATM, and mobile and net banking, among others.
  • DigiSaathi, which is available in both English and Hindi, even guides them on how to avail or use any particular product or service.
  • DigiSaathi also helps customers with their transaction-related queries, by guiding them and sharing the contact details of concerned banks/ institutions.
  • DigiSaathi is available to customers via website & chatbot facility at www.digisaathi.info, through toll-free calls - 14431 & 1800 891 3333 and on WhatsApp by messaging on +91 892 891 3333. 
Significance 
  • Unified Payments Interface (UPI) accounts for over 60 per cent of retail transactions in India.
  • A majority of these transactions are low-value, with volumes of transactions below Rs 100 making up for 75 per cent of the total.
  • UPI saw 540 crore transactions worth Rs 9.60 lakh crore in March.
Who founded Whatsapp? 
  • WhatsApp was founded by Brian Acton and Jan Koum, former employees of Yahoo!.
  • Initially, WhatsApp was not intended to be a messaging app.
  • WhatsApp, is an internationally available American freeware, cross-platform centralized instant messaging (IM) and voice-over-IP (VoIP) service owned by Meta Platforms.
  • It allows users to send text messages and voice messages,make voice and video calls, and share images, documents, user locations, and other content.
  • WhatsApp's client application runs on mobile devices but is also accessible from desktop computers.
  • The service requires a cellular mobile telephone number to sign up.
  • In January 2018, WhatsApp released a standalone business app targeted at small business owners, called WhatsApp Business, to allow companies to communicate with customers who use the standard WhatsApp client.
Whatsapp 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.
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.
UPI Next target 
  • 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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