WhatsApp’s entry into digital payments in India raises security concerns

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The Reserve Bank of India has come up with new norms for the storage of digital payments data within the country. In its monetary policy statement, the central bank has stated that all payment system operators must ensure the payments data be stored within the country in order to have unrestricted access to all payment data for supervisory purposes. The payment system operators have to comply with the guidelines within 6 months from the time of releasing the statement. The new norms impact payment gateway companies like PayPal and PayU, payment networks like MasterCard and Visa, and technology companies like WhatsApp and Google who want to enter the consumer payments space in India. According to the CEO of PayU, Amrish Rau, the new norm is a welcome directive to follow. Meanwhile, MasterCard and Google are awaiting detailed guidelines of the new directive from RBI before reacting.

Digital Payments

Paytm, India’s largest payments system raised concerns about global players like WhatsApp entering into the digital payments space. Paytm owns 68% of the market share in digital payments in the country. Vijay Sharma, the CEO of Paytm also voiced concerns about Facebook customising the Unified Payments Interface (UPI) for its own benefit when in fact the interface was developed by the National Payments Corporation of India to ensure stable and secure online payments. The primary concern is that WhatsApp may compromise the security of online payments by customising the interface and eliminating the necessity for login to make payments via UPI. Another concern is the restriction of access to other UPI-based payment platforms by WhatsApp’s platform.

Paytm has 300 million users while WhatsApp has 230 million users. Although Paytm which is valued at $10 billion, is a dominant payments system at present, there are likely chances of WhatsApp commanding a sizeable share of the Indian digital payments market. It is certainly plausible that WhatsApp users may find it extremely convenient to use a WhatsApp dedicated payments system but Paytm still commands the offline payments space as a majority of the Indian population is yet to discover the internet.

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