WhatsApp Payments Moves Closer to India Launch

Facebook is moving a step closer to launching its long-delayed WhatsApp payments service in India after wrapping up an audit of related data practices, according to people familiar with the matter.

The payments offering has been in beta mode in India since early 2018 for a million users, but the nationwide debut has been delayed, in part because of government regulations. WhatsApp is required to show a third-party auditor that all data involved in payments will be stored on servers only in India. WhatsApp is preparing to submit the report for approval to India's banking regulator, the Reserve Bank of India, said one of the people, asking not to be named as the matter is confidential.

WhatsApp is moving into a crowded and competitive field, where local startups and global players are already slugging it out. Amazon Pay and Paytm, the country's most popular digital payments service, have already complied with the Reserve Bank's data localisation guidelines. India's digital payments market is projected to grow five-fold and hit $1 trillion by 2023, according to a report by investment bank Credit Suisse Group AG.

WhatsApp has substantial strengths including an India user base that's estimated at more than 300 million. The Facebook unit could grab market share from rivals and shake up the industry, said Arnav Gupta, an analyst who tracks digital payments at Forrester Research.

“Everybody from eight to 80 years old in India are clued into WhatsApp, giving it phenomenal reach,” said Gupta. “Besides, peer-to-peer businesses like MakeMyTrip and BookMyShow, which are already using WhatsApp, will find it very easy to route payment transactions through the messaging app.”

WhatsApp declined to comment on whether or not an audit is underway. "WhatsApp looks forward to providing WhatsApp Payments based on the UPI standard to all users in India and we continue to work with our local partners towards a shared goal of supporting a more Digital India," spokesman Carl Woog said in an email.

The India initiative comes after Facebook unveiled plans to introduce its own cryptocurrency, called Libra, next year with multiple partners. That project will face hurdles in India, as it does in the US, since the country's central bank has banned all regulated entities from dealing in virtual currencies. But Libra is conceived as a means to let people easily send money around the world, including through its own WhatsApp payment service. Mark Zuckerberg, Facebook chief executive officer, has said that “it should be as easy to send money to someone as it is to send a photo”.

The India payments audit currently underway meets the regulator's stipulation which asks that all data be stored in India including “full end-to-end transaction details/ information collected/ carried/ processed as part of the message/ payment instruction.” India's central bank gave foreign and Indian payments services time to comply. “For the foreign leg of the transaction, if any, the data can also be stored in the foreign country, if required,” the Reserve Bank stipulated.

The messaging app's entry into India's digital payments market has been likened to that of WeChat, given that it has a massive user base, and is also expected to reshape payments like the Chinese player did when it expanded beyond messaging. The pilot version was praised as user-friendly and threatens other players like Paytm and Google Pay which lack the vital messaging component. But it's drawn criticism too. Vijay Shekhar Sharma, founder of rival Paytm Payments Bank, had claimed that WhatsApp bypassed security requirements and parent Facebook was attempting to build a walled payments garden.

Separate from payments and regulation, WhatsApp has faced criticism in India. Its messaging service has been used to spread fake news and rumours, including some that said to fuel nearly two dozen lynchings in the country.