- WhatsApp has earned regulatory approval to launch Whatsapp Pay, an UPI based payment system after wait of 2.5 years.
After being stuck in beta mode for more than two-and-a-half years, WhatsApp’s famous messaging platform has earned regulatory approval to launch a ‘graded’ Unified Payments Interface (UPI) where it will initially grow to a maximum of 20 million users. So far, since February 2018, it has been limited to 1 million users.
The significant development came on a day when the Indian National Payments Corporation (NPCI), which operates UPI, also said that from January 1, 2021, it will introduce a 30 percent limit on total payment volumes through a single third party payment app. They will have two years to comply with current third-party applications on UPI until January 2023. This will be available from next January for WhatsApp and other potential updates on UPI.
Given its success, WhatsApp, which has 400 million monthly active users in India, was supposed to catch a large chunk of users on UPI.
As of now, as of October, Google Pay and Walmart-owned PhonePe are the UPI leaders who hold approximately 40 percent of UPI shares each. The entry of WhatsApp has long been feared by competitors such as Google Pay, PhonePe, Paytm, and others as it can alter market dynamics.
Both announcements came right after UPI had just clocked 2 billion transactions for the first time in a single month last month. NPCI said that in the multi-bank model, WhatsApp will launch on UPI, while its 30 percent payment volume limit would ‘help address the risks and protect the UPI ecosystem as it scales up further.’ To this notion, industry players were averse. In reality, Sameer Nigam, co-founder and CEO of PhonePe, told TOI in September that the idea was not good and why anyone would invest if their leadership was ‘punished.’
Having the final nod has not been simple for Facebook-owned WhatsApp. Though regulators were initially not pleased with their compliance with data localization, they also faced at least two legal challenges in the Supreme Court, where petitions requested blocked entry into digital payments. In July, TOI wrote, quoting a letter from NPCI to RBI sent in June, confirming compliance with WhatsApp’s data localization to the banking regulator. But it was not then that approval was granted.
WhatsApp runs on the Unified Payments Interface ( UPI), which is the same system used by Google Pay, Phone Pay, BHIM, and various bank applications. And you don’t have to carry some cash in your Whatsapp ‘pocket.’ In your bank account, the money is stored and the app will actually help you pass it to other individuals and vice versa. When registering for payments, Whatsapp will generate a new UPI ID.
For Indian numbers connected to Indian bank accounts, WhatsApp pay can only be used. They will not be used by people who have WhatsApp on their international numbers.
The Rs 1 lakh transaction cap for UPI also applies to Whatsapp. UPI is a free service and for transactions on it, you will not be paid. By simply entering their bank account number and IFSC code, some UPI apps allow you to send money to people. On Whatsapp, this function has not been activated yet.
With PhonePe, Google Pay, BHIM, Paytm, Amazon Pay already fighting in the UPI space which is growing with leaps and bounds, it will be interesting to see how an app which the largest user base leverages the opportunity. The integration of UPI in WhatsApp will make it convenient for most of the users.
