Why launch of WhatsApp Pay in India may be delayed

Data processing compliance is the main reason behind the delay.

The government, on several occasions, has made it clear that Indian financial data needs to be stored exclusively onshore and if it is processed outside, it needs to be brought back in 24 hours.

The launch of WhatsApp Pay in India may get delayed as the government is unhappy with the Facebook-owned messaging platform over data processing compliance, said people in the know.

The government, on several occasions, has made it clear that Indian financial data needs to be stored exclusively onshore and if it is processed outside, it needs to be brought back in 24 hours.

The sources said that both government and banking regulator Reserve Bank of India (RBI) have raised concerns over a few of WhatsApp’s clauses which will possibly delay the launch, widely expected to take place this year.

“One of the main concerns of the RBI is WhatsApp’s compliance around data processing.

"The RBI had said in June that system providers will be allowed to process data outside India but they will have to bring it back to India within 24 hours of processing and that the data should be erased from foreign systems.

"There are issues and some red flags regarding data processing and storage by WhatsApp,” one of the sources said.

Payments through WhatsApp were introduced to a test group of a million users in February last year.

The service is based on the Unified Payments Interface (UPI) standard, which has been developed by the National Payments Corporation of India.

WhatsApp Pay is being touted as possibly one of the biggest payments players in the country even before its launch, given that the messaging service giant counts India as its biggest market with over 400 million users.

According to a person familiar with the banking regulator’s view, the issue regarding WhatsApp Pay’s data localisation compliance has little to do with the fact that the service belongs to a US-based firm. Google Pay, which is the most popular payments app built on UPI, also has a US-based parent.

“The difference is that Google Pay was built for India (It was launched as Google Tez in India first in 2017). WhatsApp Pay, on the other hand, is already used by millions of people and WhatsApp is trying to contextualise it to support payments.”

It is learnt that a third-party security audit is being performed by one of the Big Four consultancies to check for security compliance of WhatsApp Pay.

When asked, WhatsApp cited its Global Head Will Cathcart’s statement on July 25, in which he said the firm has launched a successful pilot of WhatsApp payments on the UPI standard, and is looking forward to expanding it, adding that it “can’t wait to provide this service to our users across India this year”.

He had also stated in another media interview that WhatsApp Pay was 100 per cent compliant with the data localisation norms set by the banking regulator.

The Indian digital payments space is expected to reach $1 trillion by 2023, and it would be led by the growth in mobile payments, according to a report by financial services company Credit Suisse.

This explains the increasing number of payments apps, especially on UPI, such as PhonePe, NPCI’s BHIM, Google Pay, and Paytm.

Over the last one year, experts have also raised several issues related to WhatsApp Pay.

“WhatsApp is an unregulated entity and as an issuer side intermediary will have access to card tokens, which are a critical link in the transaction flow.

"It is essential that only regulated entities get access to payments data for security purposes,” said one of the experts.

Some also claimed that there are issues with regards to customer grievance redressal and trust.

Photograph: Dado Ruvic/Reuters