Expected to be one of the biggest disruptions in the digital payments space, WhatsApp Pay seems to be facing yet another delay. The reason for this delay is being attributed to Facebook examining data privacy concerns, including how it will store and share user data in line with the RBI’s mandate of storing data in India.
An ET report cited sources as saying that for the National Payments Corporation of India (NPCI) has restricted the testing of WhatsApp Pay’s beta version to a sample of 1 Mn users or 1% of WhatsApp’s total user base, whichever is lower.
At present, the Facebook-owned WhatsApp has 200 Mn active monthly users in India. It is speculated that so far 700K users have tried the service.
Inc42 had earlier reported that a formal launch was expected this week, but bankers with direct knowledge of the matter have told ET that there is no clarity on when the digital payments service will be launched.
Even as WhatsApp Pay’s partner banks — ICICI Bank, HDFC Bank, and Axis Bank — have completed the technical integration with the platform, heated discussions are on about the payment procedure, due to which it is speculated that the launch won’t be happening this week.
Non-Compliance With Two-Factor Authentication?
Meanwhile, there are allegations that WhatApp Pay has not adhered to the NCPI’s two-factor authentication rule. The report cited a section of bankers who believe that unlike other Unified Payments Interface (UPI) applications, WhatsApp Pay has not adhered to the norm.
However, those defending WhatsApp Pay said that: “By two factors, we mean ‘what we have’ and ‘what we know’. For WhatsApp Pay, the first factor is the device and the second factor is the UPI PIN, hence there is no violation of the RBI norm.”
It must be noted, however, that the likes of Paytm and Google Tez insist that users activate the device lock before entering the payments environment as an additional authentication step, which is not the case with WhatsApp Pay.
The question on WhatsApp’s two-factor authentication adherence was first raised by Vijay Shekhar Sharma, founder and CEO of Paytm. At the time, Sharma had claimed that the lack of a login makes WhatsApp payments a security risk, akin to giving an “open ATM” to everyone.
Recently, the ministry of electronics and IT (MeitY) had written to the NPCI seeking a clarification on how WhatsApp Pay will abide with Indian laws on sharing of user data.
WhatsApp Pay Examining Data Localisation Norms
After the RBI’s order to companies to store data in India, WhatsApp Pay is examining how to fulfil the obligations.
A WhatsApp spokesperson said, “Payments data is used to enable transactions, protect people from abuse and fraud, and offer customer support. The data is stored securely, and sensitive user data such as the last six digits of a debit card and UPI PIN are not stored at all.”
The ET report cited a senior banker aware of the development as saying: “The RBI mandate clearly says that financial data will have to be stored within the country. But for players like WhatsApp or Google, the information they might have on their users — like profile details and others — will not classify as financial information; the RBI can only regulate financial metrics.”
Some bankers have suggested that third-party service providers like Google and WhatsApp get only limited visibility on the financial details of users, and therefore, they will track users’ spending behaviour.
The RBI had given six months to payment companies to comply with the new norms.
Digital Payments In India
One of the biggest players in the digital payments space, Paytm, has claimed that it is the largest contributor to the overall volume of UPI transactions in the country. It claimed that over 40% of all UPI transactions made in February 2018, amounting to 68 Mn, where made on its platform.
In a report, Credit Suisse predicted that India’s digital payments industry, which is currently worth around $200 Bn, is expected to grow five-fold to reach $1 Tn by 2023.
With digital payments growing manifold, and recent data showing a 22.91% growth in the value of UPI transactions for May 2018, WhatsApp Pay is one of the most-awaited launches. Let’s see how long it takes for Facebook to resolve the data privacy issues and comply with RBI norms.