NPCI gives approval for WhatsApp to go live on UPI in graded manner

Maximum 20 million user base initially; NPCI puts 30 per cent cap on third party apps' share of UPI transactions

The National Payment Corporation of India (NPCI), which manages Unified Payment Interface (UPI), has decided to allow Facebook backed messaging service WhatsApp to go live on UPI in the multi-bank model. WhatsApp can expand its UPI user base in a graded manner starting with a maximum registered user base of 20 million in UPI, NPCI said in a statement today.

Though the condition of 20 million will be a dampener, it is some relief for WhatsApp, which began its pilot run two years ago, while it awaited regulatory clearances to launch its UPI-based payments for its 400 million users in India.

In August, NPCI had informed the Reserve Bank of India (RBI) that WhatsApp had met data localisation requirements.

In a related development, NPCI has capped the share of total number of transaction that a third party application can process at 30 per cent of total volume of transactions processed in UPI, effective January 1,2021.

“…with UPI reaching 2 billion transactions a month and with potential for future growth, it has issued a cap of 30 per cent of total volume of transactions processed in UPI, applicable on all Third Party App Providers (TPAPs)”, NPCI said.

NPCI has said, the cap of 30 per cent will be calculated basis the total volume of transactions processed in UPI during the preceding three months (on a rolling basis). And, the existing TPAPs who have exceeded the cap, will have a period of two years from January 2021, to comply with the same in a phased manner.

Currently, third party applications such as PhonePe, Google Pay, Paytm, and Amazon Pay, dominate the UPI ecosystem, controlling majority of the transactions.According to industry estimates, the biggest player is Google Pay with over a 40 per cent market share, closely followed by PhonePe.

“It is a surprising move. Having a standard cap of 30 per cent is probably not the best way to do this because it stifles competition and makes people stick to edges. In general having an anti-monopolistic policy with specific limit would make sense. So, controlling monopoly is good but I am not sure if it’s the best way to do it. The positive thing is there is two years’ time for existing players so maybe we will have better implementation of this as we come to the two year time line”, said Harshil Mathur, CEO& Co-founder, Razorpay.

Experts agree on the fact that a hard cut off at 30 per cent is not the best way to curb dominance. UPI being an interoperable platform there should be a stance on monopoly but having hard limit is not the best thing.

UPI recorded over two billion transactions in October, a milestone that highlights the faster adoption of digital payments in a post-Covid-19 world. Launched in 2016, it had crossed 1 billion transactions for the first time in October 2019. While it took UPI three years to reach a billion transactions in a month, the next billion came in just a year.

As businesses open up, there is huge uptake in UPI payments as an increasing number of customers opt for digital payments, owing to convenience and safety. With the festive season in full bloom, October has seen a huge surge in UPI payments.