Facebook stares at a new hurdle in India with its WhatsApp Pay

Facebook’s latest offering in the country, WhatsApp Pay, has divided the industry. Battle lines have been drawn — much like what happened when the social media major had announced Free Basics. And, like earlier, it is Paytm founder Vijay Shekhar Sharma who is opposing the most.
 

A chunk of the industry is backing Sharma, and others are backing Facebook on whether the payments platform should be allowed to be rolled out in its current form.  
 

The opposition

On Sunday, a host of tech industry insiders came out with their concerns on how WhatsApp was incorporating Unified Payments Interface (UPI). 
 

“We support the NPCI (National Payments Corporation of India) in its endeavours for facilitating digital payments in the country. But we hope that a level-playing field is ensured to all players — including banks and non-banks — enabling interoperable, convenient and secure platforms based on open standards. All payment apps need to be fully compliant with all the guidelines drafted for its usage to ensure fair play for all stakeholders,” said Subho Ray, president, Internet & Mobile Association of India. 
 

Others said that the biggest challenge to India’s growth story remains regulatory uncertainty and an uneven playing field and that the latest Whatsapp UPI controversy due to discriminatory policies has amplified this phenomenon. 
 

“Facebook was earlier forced to retreat on its plan to own India’s internet traffic due to opposition to Free Basics. It has now used the same tried and tested strategy of using regulation to own the payments space in India by having policies changed as per its convenience. A beta testing with a million users (the earlier limit was 10 million customers) exposes a big chunk of Indian citizens to financial risks. The government must look into this and ensure a level-playing field for all PSPs (payments service providers), especially if we want the Indian growth story to continue,” Shailesh Vikram Singh, executive director, Seedfund, said. 
 

Growing ecosystem

An average Indian user spends about two and half hours on WhatsApp per day, estimates say. With more than 270 million registered users in the country, WhatsApp is backed by a company that has a market cap of over $515 billion. This makes it one of the most formidable opponents to the Indian fintech industry. 

For Facebook, just like Google, Amazon, Alibaba and Uber, India is the biggest gamble, which would help them get its hands on the next billion internet users. 
 

WhatsApp has already started WhatsApp for Business. From getting e-ticketing, delivery updates from online marketplaces, paying utility bills, buying financial services to even booking a plumber, the app is rapidly adding a host of products.

The company has got into a tie-up with MakeMyTrip and Goibibo. And, according to sources, is set to add e-commerce marketplace major Flipkart on its platform. It is also in talks with electricity boards, telecom players and government utility so that users can pay bills and get in touch with them for assistance through WhatsApp.
 

Facebook has also launched a pilot project of its marketplace in a few select cities. If things go as planned, the marketplace might see some integration with the chat app, making WhatsApp a complete ecosystem for all services. 
 

The threat 
 

Experts point out that banks are now partnering with global tech majors to take on the likes of Paytm. 
 

“Banks are looking to partner with all global tech players to neutralise Paytm, as it is rapidly emerging as a payments market leader. The only way to take on Paytm is to use UPI and partner with global tech players, who already have the customers Paytm is acquiring. Banks are seeing it as a way of neutralising Paytm and NPCI is seeing it as a way of showcasing its UPI platform. However, UPI being an open platform, even Paytm has started clocking UPI transactions,” said Gautam Chhugani, director and senior analyst, India Financials and Fintech at Sanford C Bernstein. 
 

The NCPI had last week given its consent for a beta launch of WhatsApp BHIM UPI with limited user base of a million and low per-transaction limit. It had said that broad principles for interoperability like the ability to send or receive money through any BHIM UPI ID, and read or generate BHIM/Bharat QR codes were required in a final BHIM UPI app. In the official statement, however, it did not talk about whether WhatsApp Pay would have two-factor authentication and whether it would send SMS alerts on every transaction.  
 

Reacting to the NPCI’s statement, Paytm had said: “WhatsApp must implement login and password like all other BHIM UPI apps. This statement is also silent on issues such as the requirement to send SMS notifications for every UPI transaction.”