Whatsapp is now in the final stage of testing for its payments feature that has been built on the UPI platform.
In the backdrop, concerns have cropped up regarding data privacy and its potential to monopolise the sector (due to its massive reach).
What new on WhatsApp?
WhatsApp has developed a Payments feature that allows users to send money to their contacts on the app directly from their bank accounts.
This feature is based on the United Payments Interface (UPI), which allows instant direct bank-to-bank transfers via a virtual payee address.
Currently - beta-testing is going on with a limited user domain of 1 million, and it may become live for all shortly.
National Payments Corporation of India (NPCI), which is regulator for UPI and umbrella body for all retail payments in India, has also been updated of it.
The Banking Support - WhatsApp is not a bank, and it can’t process money transactions on its own due to legal constraints.
It has been stated that ICICI will be partnering the initiative to provide the required banking support for the monetary transactions.
Accessory Conditions - It is mandatory for both the sender and receiver of the payment to have the ‘payments feature’ enabled in their Whatsapp.
All transactions are said to final and there is no option for backtracking once the transfer has already been processed.
WhatsApp’s terms and conditions for using the feature say the user must be 18 years or older, but it is not clear how this will be verified.
How will the system work?
A bank account that supports UPI is needed for transacting on the platform.
Once the Payments System is activated on a user’s Whatsapp app, he/she would’ve to choose his/her bank from a list of banks that is provided.
The service is slated to enrol almost all UPI enabled banks on its platform, and the user needs to link his/her personal bank account to access the facility.
It’s mandatory for the mobile number with the WhatsApp account to be same as the mobile number with that of the bank.
Notably, UPI on BHIM (Bharat Interface for Money) also has a similar provision, as the mobile number is the identifier to locate the bank account.
Debit card information would have to be entered to sync Whatsapp’s Payment System with the bank account, while Aadhar details aren’t needed.
A payment instruction can then be attached to a message, in the same way as users attach a file, a video or a photo.
Each transaction has to be authorised by a unique four-digit UPI PIN, which is generated when a user activates the feature on her bank account.
If the UPI PIN is forgotten, there is the option of generating a new one.
Is it merely a platform for informal and small retail transfers?
As payments are envisioned on a peer-to-peer basis, no upper limit specific to the platform is expected (not sure) once the app goes fully live.
WhatsApp Payments will also work on Group chats and users will be able to pick an individual member in a WhatsApp Group to send money to.
Tranfers involving business and merchant accounts are currently not included on the platform, but these may also be covered subsequently.
Notably, Whatsapp already has a separate business version of the app in India.
What are the privacy related implications?
Whatsapp has stated that it won’t retain debit card details or the UPI PIN, but there is considerable concern on other transaction data being monetized.
Notably, third parties, including Whatsapp’s parent “Facebook” do have stakes in access these valuable banking and transaction details.
The privacy policy for WhatsApp Payments says that those who agree to the service are also agreeing to the company’s current data practices.
This would hence govern - collection, use, processing, and sharing of your information that has been retained with consent.
Additionally, payments related aspects like transfer and processing of information will also be monetized across countries where Whatsapp operates.
Such privacy clauses will hence enable automatic information aggregation when a user sends or receives a payment.
This will including the date and time, the sender and receiver’s name and ‘virtual Payments Address’ (VPA), and the reference transaction number.
How will it impact the open UPI ecosystem?
As WhatsApp currently has a 200 million active user base in India, its foray into the Payments sector could prove a gamechanger for the entire ecosystem.
People may switch entirely to the app for smaller, daily transactions, which could potentially wreck other mobile wallets like PayTm.
Additionally, once businesses are allowed to accept payments via WhatsApp, the feature’s use could be boosted even further.
Some see this as Facebook’s attempt to monopolise the open UPI platform after its failed try to destroy the open internet with its “Free Basics” program.
This accusation stems from indications that ‘Whatsapp Payments’ is being built as a closed net without interoperability with other platforms.
Interoperability would mean enabling a person accessing UPI on one platform (say BHIM) to transact with someone on another platform (say Google Tez).
Considering this scenario, NPCI has now clarified that WhatsApp Payments won’t be allowed to go live unless the principles of interface are complied with.
Notably, NPCI envisions that any UPI account should be able to seamlessly transfer to any other UPI account irrespective of the operating platform.
