WhatsApp Payments Trial Run To Be Completed By July

Addressing the Supreme Court, Facebook-owned WhatsApp has said that only the trial version of its digital payments services is underway in the country, and India-wide roll-out will only happen after the company complies with the government’s data localisation mandate.

Represented by senior counselors Kapil Sibal and Arvind Datar, WhatsApp said that it would comply with Reserve Bank of India (RBI) data localisation norms before launching the full version.

The court was hearing the petition seeking directions for WhatsApp to comply with RBI norms for its payments service. The bench of Justice Rohinton Nariman and Vineet Saran has listed the matter to be heard next in July.

WhatsApp Payments: What’s The Case?

In August 2018, the Supreme Court had taken cognizance of a petition seeking a direction to WhatsApp to appoint a grievance officer in India and to comply with the tax laws and data storage laws.

It was claimed by rival digital payments platforms and some fintech experts that WhatsApp was being allowed to continue with its payments services and other services “without any checks”.

The RBI circular of April 2018 made it mandatory for a payment service to have offices and store payments data in India. The petition alleged that the rule appears to be violated by the chat messaging company as it is a foreign company having no offices or servers in India.

The petition emphasised that WhatsApp has over 250 Mn active users in India, and yet, the messaging service has no grievance redressal number for users in India.

It further stated that despite being the largest messaging platform in India, WhatsApp remains largely unregulated, given that the laws in place are not complied with.

The Ground Reality

Since the beginning of a pilot project, WhatsApp’s entry into the country’s digital payments sector has been marred by conflicts and controversies. Vijay Shekhar Sharma, CEO of Paytm, accused the company of trying to enter the nation’s digital payments market through unfair means by flouting NPCI rules on UPI and deliberately restricting the service to its own 200 Mn users.

The NPCI, meanwhile, said that it has given its consent to the company to roll out the beta launch of the WhatsApp BHIM UPI with a limited user base of 1 Mn and a low per transaction limit.

Here’s a timeline of WhatsApp Payments so far:

June 2018:

• National Payments Corporation of India (NPCI) restricted the testing of  WhatsApp Payments beta version to a sample of 1 Mn users or 1% of WhatsApp’s total user base, whichever is lower.
• The Ministry of Electronics and IT (MeitY) wrote to the NPCI seeking a clarification on how WhatsApp Payments will abide by Indian laws on sharing of user data. The ministry further asked the NPCI to check that all compliances are in place before WhatsApp is allowed to scale up its services.
• WhatsApp updated its terms and policies, explaining that while it uses Facebook’s infrastructure for payments in India, it was committed to not using payments data for commercial purposes.

July 2018:

• WhatsApp launched its Forwards label, which will help users identify if a text or a video has been forwarded by another user and not originally composed.
• The government set up an internal group of officers to examine the possibility of sending a second notice to WhatsApp.
• US and India-based senior executives from WhatsApp met the Election Commission (EC) and assured the commission that it would make all possible efforts to prevent misuse of the platform in India’s coming election cycle.
• The MeitY asked WhatsApp and its partner banks to supply more details on the payments system. It also asked the NPCI to confirm whether WhatsApp Payments is fully compliant with its requirements.

August 2018:

• The government said that the company can’t launch WhatsApp Payments till it sets up an office and recruits a team in India.
• WhatsApp CEO Chris Daniels held talks with Telangana IT minister K T Rama Rao (KTR) in Hyderabad to set up a base for WhatsApp’s customer service operations.

September 2018:

• The Indian government was drafting a letter asking WhatsApp to come up with a technology to trace the origin of incendiary messages circulated on its platform.
• WhatsApp was looking to hire an associate general counsel or legal head in India, who will be responsible for advising the firm on regulatory and litigation matters.

October 2018:

• WhatsPay built a system to store user’s payment data locally within the country in compliance with the Reserve Bank of India’s (RBI) guidelines.
• NPCI said that the WhatsApp move of mirroring data will not be enough to comply with the rules. NPCI is said to have believed that the company did announce to set up systems to store data locally however it did not clearly mention if the user payments data will be stored “only” in India or will it be kept overseas as well.

November 2018:

• NPCI asked WhatsApp for an update on their plans on data localisation.
• WhatsApp CEO Chris Daniels put in a formal request seeking RBI approval for expanding its payments service — WhatsApp Payments — across the country.

December 2018:

• NPCI said WhatsApp has not given a timeline for complying with the Reserve Bank of India’s data localisation norms.

January 2019:

• Supreme Court ordered that the RBI be made a party to a petition pertaining to the case to check WhatsApp’s adherence to data localisation norms for setting up of its proposed payments business in the country.

April 2019:

• WhatsApp said it will rely on a third-party company to audit its payments system and ensure that it complies with Indian data localisation rules.
• WhatsApp was sorting some engineering work and then will follow the RBI guidelines which mandate for a payments company to store data in India.

According to NITI Aayog’s ”Digital Payments (2018 edition)”, India’s digital payments industry is estimated to grow to $1 Tn by 2023. It also suggested that the value of digital payments will likely jump from the current 10% to over 25% by 2023.

WhatsApp Payments will be competing with the likes of Paytm, Google Pay, Amazon Pay and PhonePe for a share of the massive digital payments ecosystem in India. But after a long struggle of getting its business on track, the response WhatsApp Payments gets from the users will determine if the long struggle with the government is worth it.