Apple Takes Lessons From Amazon & Whatsapp, Halts Payments Plan

Lessons From Amazon, WhatsApp Help Apple Put Payments Plan On Hold

SUMMARY

Apple held discussions with a few leading banks and the National Payments Corporation of India

The company is worried about the data localisation directive of the Reserve Bank of India

Apple also ran into technical and design hurdles related to the flow of payments on UPI

“Only a fool learns from his own mistakes. The wise man learns from the mistakes of others.” — Otto van Bismark

It looks like global smartphone maker Apple is being ‘wise’ and has learnt from its peers Amazon and Whatsapp’s mistakes. Apple has decided to put its plans to launch a Unified Payments Interface (UPI)-based payments platform in India on hold after stumbling into the regulatory grey zone.

The full rollout of similar payments products by global ecommerce company Amazon and Facebook-owned chat messaging service WhatsApp have been delayed as the duo is engaged in regulatory tussles with the Indian authorities.

Reports cited people familiar with the development as saying that Apple put the brakes on its payment service Apple Pay in the country despite having held discussions with a few leading banks and the National Payments Corporation of India (NPCI), which manages the UPI platform.

The company is worried about the data localisation directive of the Reserve Bank of India (RBI) and also ran into technical and design hurdles related to the flow of payments on UPI.

Apple is now waiting to see how the regulatory landscape shapes up before launching its payment service in India.

In April, the Reserve Bank of India (RBI) had asked all payment system operators in the country to store data relating to their customers in India to ensure that user details remain secure in case of privacy breaches.

The development came in the wake of a data privacy scandal in which Cambridge Analytica harvested the profiles of up to 50 Mn Facebook users without their approval during the last US election. Privacy advocates in India and the Indian government have since raised concerns that a similar breach could happen in the country to target voter opinion, especially with the general election due next year.

The RBI data localisation mandate has derailed the plans of many other multinational companies in India as well, including Mastercard, Visa, Amazon, WhatsApp and PayPal. Even as Google revamped its Tez to Pay in India, the company said it is assessing the evolving situation around data localisation.

Apple Pay In India: Plans That Hit A Roadblock

Last year in October, reports had surfaced that Eddy Cue, Apple’s Senior Vice-President for Internet software and services, had said the company was looking to bring Apple Pay to the Indian market.

“It is great that all of these payment mechanisms are coming out in India because it empowers people to be able to pay. What Apple Pay does is make that process easy, integrated and safe. We absolutely want to bring Apple Pay to the market here,” he had said in an interview last year.

The reports had said that Apple was expecting to launch its payment service in India “in the near future”, without specifying the timeline for the launch.

At present, Apple Pay is available in Australia, Canada, Mainland China, France, Hong Kong, Ireland, Italy, Japan, New Zealand, Russia, Singapore, Spain, Switzerland, the UK, the US, and Taiwan.

The report had further highlighted that Apple wanted to include fingerprints as a mode of authentication for UPI payments, which the NPCI did not agree to as UPI requires customers to enter a six- or four-digit number to authenticate transactions.

“NPCI has prescribed that transactions can be authenticated by biometrics only when they get validated by UIDAI,” reports had said, adding, “NPCI does not allow biometrics collected by devices as a mode of authentication.”

In the last few months, Apple has lost some top executives in India and has hit an impasse with the telecom regulator over its ‘do-not-disturb’ app. Last month, the iPhone maker agreed to include about 75% of the features of the DND app in its new operating system.

Digital Payments Industry In India

The digital payments industry in India has been growing by leaps and bounds, attracting major international companies in the space.

A report by Credit Suisse predicted that India’s digital payments industry is expected to grow five fold to reach $1 Tn by 2023
Digital spending by consumers is expected to grow nearly 2.5 times to $100 Bn by 2020, according to a Google-BCG report
The Indian government’s UPI-based BHIM app also recorded a growth of 18% after crossing 19 Mn transactions in July as compared to 16 Mn in June
UPI recorded 312 Mn transactions in August this year, a growth of 32% from 235.6 Mn transactions in July

The digital payments industry in India is led by the likes of Paytm, a decacorn in the Indian startup ecosystem that has been expanding its portfolio continuously. Another major player is the Flipkart-owned PhonePe, which claimed the top spot in UPI transactions in July.

In August, the Bengaluru-based PhonePe had also claimed that it has a 40% share of the market. It added that the platform crossed 100 Mn transactions in July and drives nearly 70% of overall merchant transactions on the UPI network.

In the case of WhatsApp Pay, the government has said that the company can’t launch its payment service here until it sets up an office and recruits a team in India. Amazon’s plan to launch its own UPI-based payment service in the country is also stuck due to concerns over the data localisation rule.

[The development was reported by ET.]