Facebook Inc.’s WhatsApp messaging platform on 5 November got the much-awaited approval to enter the digital payments market from National Payments Corp. of India (NPCI), which capped the transaction volume clocked by a company to 30% of overall payments on the Unified Payments Infrastructure (UPI) platform.
NPCI, which operates the UPI platform in the country, said WhatsApp can go live through the multi-bank model and can expand its UPI user base in a graded manner, starting with a maximum registered user base of 20 million.
WhatsApp has been running its UPI-based payment system, WhatsApp Pay, in Beta since 2018, with 1 million users. One of the biggest hurdles for the platform continued to be Reserve Bank of India’s (RBI) data localisation norms for payment providers in the country, which the company had to comply with.
WhatsApp is currently fighting a public interest litigation in the Supreme Court, filed by Communist Party of India MP, Binoy Viswam, to stop its full-scale operations, and asking RBI and NPCI to ensure data collected via the UPI platform is not exploited or used by participants.
NPCI on 5 November said that a single company on the platform can’t clock more than 30% of overall transaction volume in the preceding three months, starting 2021. If an existing company or third-party app provider has exceeded the specified cap, it will have a period of two years from January 2021 to comply with the rules.
Mint first reported on 30 June about NPCI capping the share of UPI players.
According to NPCI, the decision has been taken to address risks and protect the UPI ecosystem from frauds as it scales further. NPCI first proposed the plan to limit the number or value of transactions in August 2019. It then said that payment apps will hit the limit if they exceed 50% of all UPI transactions in the first year of the implementation of the rules, 40% in the second year and 33% from the third year onwards.
NPCI will trigger warnings to payment apps and sponsor banks if they are near the threshold. In case of a breach of the mandated threshold, NPCI will start penalising payment firms and banks, and ask them to stop onboarding new customers with immediate effect, Mint had reported.
The move is expected to hurt payment firms, including Google’s GPay (41%) payments app and PhonePe (42%), forcing them to limit their dominance in the UPI payments segment.