On Friday, 6th November 2020, WhatsApp (1) unveiled its payment services in India after receiving the approval from the NPCI, National Payments Corporation of India (2), after more than two years of waiting (3).
Notably, India is one of the biggest markets for the tech giant headquartered in the US, with more than 400 million users (4). However, not all users would access the feature since NPCI had mandated the WhatsApp UPI userbase’ expansion in a graded manner, starting with a maximum registered user base of twenty million. The firm has stated that it would continue to work with the NPCI to make it available for everyone over time.
The NPCI green flag also follows another recent move, imposing a 30% cap of the total transactions in volume processed in UPI, applicable to all third-party app providers, effective from January 1, 2021 (5).
Facebook-owned WhatsApp had started testing its UPI-based payments system in 2018 and will now compete with entities like Google Pay, Paytm, Amazon Pay, and PhonePe.
“Starting today, people across India will be able to send money through WhatsApp. This secure payment experience makes transferring money just as easy as sending a message.”
– WhatsApp, in a blog post (6).
While commenting on the development, Mark Zuckerberg, the CEO of Facebook, stated in a video post that India had created something special with UPI. It is opening up new opportunities for micro and small businesses, the backbone of the Indian economy.
“I am excited today that WhatsApp has been approved to launch payments across India. Now you can send money to your friends and family through WhatsApp as easily as sending a message. There’s no fee, and more than 140 banks support it. And because it’s WhatsApp, it’s secure and private, too.”
– Mark Zuckerberg, CEO of Facebook (7).
Zuckerberg added that when people have access to financial tools, they are more empowered to support themselves and others and start a business. In the long-term, there are needs for innovations that give people more control over their money, while making payments easier is a baby step that can help.
Make Online Transactions Easy with WhatsApp Payments
Due to the on-going COVID-19 pandemic, most people want to have little contact with others and follow the social distancing norms by the Indian government. It has also changed how we make transactions while making contactless payments a new normal (8).
Google Pay, Phone Pe, Paytm, and other digital payment service platforms are in massive demand. However, WhatsApp Pay is the best option for people who highly depend on online transactions but do not wish to download additional apps on their phones.
WhatsApp Payments is based on UPI, Unified Payments Interface (9) of NPCI, National Payments Corporation of India. Unlike, Paytm who allows people to keep digital wallets to store their money, and Google Pay, who allows users to make bill payments, purchase gold, etc., WhatsApp Payment is only for peer to peer payments.
There were several speculations about why Facebook’s messaging application, WhatsApp, could not roll out its payment sooner in India.
Even though the government permitted it to start the trial runs for the feature more than two and a half years ago. The litigations were still pending in the Supreme Court until now.
The speculation suggested that New Delhi exerted political pressure on Facebook, which could be opposing WhatsApp Pay to get the final green wave to roll out its UPI payment services.
At present, the global digital monopoly is facing flaks over allegations that top Indian officials are promoting hate speech by functionaries and supports the Hindi nationalist Bhartiya Janata Party (BJP) (10).
The fact must be highlighted that WhatsApp had been operating in India even before Facebook had acquired in February 2014. It has now become the world’s most used messaging application but has not made a single rupee so far in India. Moreover, it has also bagged the country’s biggest number of users after spending undisclosed but substantial amounts of money.
Market analysts suggest that Facebook is not a philanthropic firm and is desperate to earn big bucks by monetizing its popular service in the country with the highest number of users. It is eyeing India voraciously and will do anything to get a holding in our digital payments market (11), especially after being shut out of China.
WhatsApp’s UPI Feature
India is the first nation across the globe where WhatsApp has tested its digital payments service. UPI is a system that aligns multiple bank accounts into a single mobile app or of any participating bank and merging several banking features, seamless fund transfer, and merchant payments under a single “canopy.” There are several mobile payment applications with the UPI system in India, including Paytm, Google Pay, and PhonePe.
Not only in India, but WhatsApp is also struggling to launch its payment services in other countries. It had rolled out the payment feature in Brazil on June 15, a week before its central bank had suspended its trial run after stating the damage possibilities, raising concerns about data privacy, efficacy, and competition (12).
Soon after the initiative of the RBI, the NPCI announced on February 16, 2018, that WhatsApp had gained approval to run beta testing for its UPI service in India, the MEITY, the Union Ministry of Electronics and Information Technology (13) wrote two letters to the NPCI in March and May in the same year.
They regarded the issues related to WhatsApp’s data storage policy and whether it would share user data with its parent entity Facebook, based in Menlo Park, California (14). It also asked if the proposed payments service would use RBI’s two-factor authentication process. It is a security process in which users provide two different authentication and verification factors (15).
What Do you Need to Know?
Notably, the payment service is only available to 20 million WhatsApp users at the moment. If you have the feature available in your WhatsApp, then you would need a bank account and phone number that is linked to your bank account to enable it.
One can easily make payments by hitting the attachments icon at the bottom of the screen that we normally use to send photos and videos.
First, WhatsApp would direct you to register, and additionally, it would ask for permission to make and use phone calls and read messages to complete the process. To make a payment, you would need to set a UPI pin. If you already have a UPI pin with an existing UPI app, you can use the same passcode.
Moreover, it is worth highlighting that You can only WhatsApp Pay with Indian numbers linked with Indian bank accounts. People who have WhatsApp on their international numbers cannot avail of the feature.
Lastly, the transaction limit for the UPI payment of 1 lakh INR is also applicable to WhatsApp Payments. UPI is a free service, and hence there are no charges for transactions on it. Some UPI apps also allow people to send money to people by adding their bank account number and IFSC code. However, the feature is yet to avail of WhatsApp Pay.
Petitions Against WhatsApp
In July 2018, an NGO, non-government organization based in Delhi called the CASC, Centre for Accountability and Systematic Change (16) in the Supreme Court. It alleged that WhatsApp had failed to comply with RBI’s data localization rules, among many other things.
It is an essential system that prevents the individual user’s financial and personal data or a corporate firm stored in a payment platform like a digital payment application or a debit from being stored and shared in computer servers located outside the nation of origin.
In May 2019, WhatsApp had assured the apex court that it would launch its full service only after following all RBI regulations. In February 2019, CASC had filed a new application to the existing petition with a request to stop all the “unlawful” trials by payment services to the Supreme Court (17).
“WhatsApp violates data localization norms as per RBI [but] is clandestinely continuing beta testing of its Payments Systems on one million Indian users. Moreover, it has now been reported that WhatsApp Pay will be rolled out to more customers, despite there being no report submitted to this court about WhatsApp’s full compliance with RBI Data localization norms (sic).”
– From the Application.
A year later, on February 28, 2020, another NGO named G2C, Good Governance Chambers (18), filed a written petition to the Supreme Court against the social media messaging platform its UPI based payment service.
The petition alleged that WhatsApp Pay is blatantly and willfully violate the mandatory guidelines and regulatory norms that form India’s entire UPI system’s fundamentals.
It further claims that such glaring violations pose a serious risk to the monetary policy and laboriously set payment systems. Moreover, it could also lead to WhatsApp Pay being a threat to the nation’s security and privacy of crores of Indian citizens.
In 2019, the RBI asked the NPCI to ensure that WhatsApp Pay follows the data localization regulations before it is allowed to roll out its services in the country (19).
“WhatsApp, by allowing its platform to compromise, has lost the confidence of Indian users. Hence, until data is localized and until it implements controls to guard against future exploitation of its platform, a license should not be granted,”
said Prashant Mali, a cyber law expert (20).
Notably, RBI had mandated its data localization policy in Aril 2018 “only in India” to enable the regulators to have unrestricted supervisory access. Compliance with these regulations was one of the primary reasons behind the delay of WhatsApp’s Payment services across India.
Making Payments with WhatsApp
The company added that it is necessary to have a bank account and debit card to make transactions on WhatsApp in India. The firm has sent instructions to banks, known as payment service providers, to initiate the transfer of money via UPI from the sender to the receiver of bank accounts.
WhatsApp is working with five leading banks, ICICI Bank, HDFC Bank, Axis Bank, State Bank of India, and Jio Payments Bank. Via Whatsapp, Users can send money to anyone using a UPI supported app. Furthermore, people would need a personal UPI PIN for each payment for additional security.
Moreover, your WhatsApp number should be the same number, which is linked to your bank number.
The company aims to architect a unique combination of WhatsApp and UPI to help local organizations address some of the era’s key challenges in the long run. It includes increasing rural participation in the digital economy and offering financial services to people who never had accessed it before.
Notably, WhatsApp’s payment feature is now available to people with the latest version of its Android and iPhone app. if it has not shown up for you yet, no need to worry as it would show up soon.
According to Wabetainfo (21), some special tricks enable the payment feature on your phone if you have not received the feature yet.
- If you don’t have access to the WhatsApp Payments, feature even though you have updated the app, look for someone who has the feature enabled on their phones.
- Ask such a user to send you a Payment Notification in your chat. One can send payment notification by tapping on Payments in the chat sharing option.
- After you receive the notification, WhatsApp would ask you to set up your payment account.
- Hit the Set-Up option to create a payments account on WhatsApp.
Notably, WhatsApp has rolled out the Payments feature in India and Brazil and soon would be available in the UK, Mexico, Spain, and Europe in the upcoming feature.
How to Set Up Your WhatsApp Payment
WhatsApp Pay enables peer to peer digital payments via its messaging platform.
The method to set up WhatsApp Payments on your smartphone:
- Open WhatsApp and go to Setting and tap Payments.
- Tap Add Payment Method and choose your bank.
- After selecting the bank, next is verifying your phone number. Tap Verify via SMS.
- Wait for the verification process to comp. After it is finished, it will show your banking details below payment methods.
How to Make Payment via WhatsApp Pay
WhatsApp Payments allow you to send money to your Whatsapp contact and people who are not part of WhatsApp Pay.
The steps to send money to your WhatsApp contact:
- Open the WhatsApp chat and tap the attachment icon.
- Tap Payment, enter the amount you wish to send and hit enter.
- Complete your transaction by entering your UPI pin.
The steps to send money to people who use other UPI apps like Google Pay or PhonePe:
- Open WhatsApp, go to Settings, and tap Payments
- Tap New Payment and select Send to a UPI ID, enter the UPI ID of the person you wish to send money and hit Verify
- Once the UPI Id is verified, entered the amount you wish to send and hit enter.
- Enter your UPI passcode to finish the transaction.
You can also send an invite to your contacts on WhatsApp who have not yet registered with Whatsapp Payments.
The steps to follow to invite them:
- Open a WhatsApp chat, tap on the attachment icon, and hit the Payment button.
- On the next screen, hit Notify to let the other person know about WhatsApp Payments features.
You need to follow these easy methods to start making digital transactions via WhatsApp.
Features of In-Chat Payment
There are several features and benefits of WhatsApp in-chat payment since it allows you to make payment to anyone on your WhatsApp contact list from anywhere and anytime. The user-friendly pay features make the transfer of funds as simple as sending photos or videos.
The beneficiary would receive a payment notification on their chat screen after the completion of the fund transfer. There is no requirement for people to ask for account details like account numbers or IFSC Code. In short, the WhatsApp In-chat application is a one-of-a-kind payment feature application.
WhatsApp has more than 1.4 billion monthly active users worldwide, making it one of the world’s largest messaging platforms. The number of active users on WhatsApp is growing every day, and the Facebook firm is expected to launch new features this year. Several of these features are already available in the beta version of Android and iOS. WhatsApp is going to introduce a few of these features in India as well.
Some of the most awaited features of the platform include the ability to edit the sent messages. Notably, it had introduced the “Delete for Everyone” feature a while ago that let users delete a sent message within 7 minutes after tapping the send button.
Moreover, users can also send money via the Scan QR Code button. After that, you will get a prompt asking you to add the amount you wish to transfer along with the UPI Pin for verification.
Users can avail of their entire transaction history under its payment section. WhatsApp would also allow you to view your WhatsApp linked bank account details.
WhatsApp Pay Securities and Controversies
There has been a colossal rise in the digital payments made across the country. With WhatsApp being a part of the digital ecosystem, several questions are raised by other market players concerning the scope of digital payments.
WhatsApp has a huge scope to change the digital payment landscape with its extensive customer base consisting of more than 400 million in the country. Hence, the adoption rate of WhatsApp payments could also be high.
The newly-introduced WhatsApp payment service has made WhatsApp more than just a messaging service app. It would push it at the forefront, and it would make a competitor to other digital payment applications such as Google Pay and Paytm.
However, with WhatsApp, there is no additional money to the wallet and then make a payment. All payments can be made via UPI. Via this method, money is directly debited from the customer’s bank account, making it a speedy and hassle-free method. Users can avail of the service on both types of platforms, Android and iOS.
Shekhar Sharma, the CEO of Paytm, stated that WhatsApp is not fair as they are skipping the primary safety measures and other important features. Several other leading payment service providers have agreed with the comments of Sharma (22).
He added that though WhatsApp uses the UPI platform, they miss out on several safety features like lack of login credentials for payment transfer, no mention of affiliation details, etc.
Nevertheless, WhatsApp has promised to take full cognizance of the privacy and security of the users. It would make users enter the UPI PIN before every transaction.
Moreover, while WhatsApp cleared of several concerns over its services, user privacy, and security, several industry veterans believe that the payment service on the app, which is already more popular than any other smartphone app in Indis, will have a rapid adoption than its rival since all its potential users are already using the app to chat with their friends and families (23). For instance, Google had launched a standalone payment app in India, whereas WhatsApp has bundled its payment feature with its messaging platform.
Conclusion: WhatsApp to Look for Further Push into the Mobile Payments Market
According to Credit Suisse (24), India’s mobile payments market is estimated to reach 1 trillion USD by 2023. WhatsApp would diversify into more businesses after rolling out its payment feature, further pushing into the mobile payments market.
Brazil’s central bank quickly ordered to suspend the service of WhatsApp payments after its roll out in June 2020. It decided to preserve an adequate competitive environment in the landscape and ensure that payment system functioning is fast, secure, interchangeable, open, and cheap. Fortunately, in India, UPI is fast, interchangeable, open, cheap, and transparent to a large extent.
It is worth highlighting that Facebook made a big push in commerce last year, and it could open more avenues if WhatsApp gains traction with payments.
Earlier in 2020, the social giant invested 5.7 billion USD in Jio Platforms, an Indian telecom giant, the largest foreign direct investment in the Indian technology segment.
Facebook executives have stated that they plan to work with Jio Platforms to explore how they can digitize 60 million small and medium-sized businesses in India.