With the launch of WhatsApp payments, UPI ecosystem set for ‘major’ disruption

WhatsApp going live with its UPI payment offering, along with the 30 per cent cap on UPI volumes for third-party apps by NPCI, is expected to cause significant disruption in the country’s payments ecosystem.

From Friday, users can make UPI payments through the popular messaging app.

“Payments is available now in 10 regional language versions of WhatsApp,” said Facebook CEO Mark Zuckerberg in a video statement.

Facebook has picked up a 9.99 per cent stake in Mukesh Ambani-led Reliance Jio Platforms, and WhatsApp going live with payments could give wings to Zuckerberg’s plan to get into the heart of India’s SME and retail segment.

WhatsApp is working with five banks in India for UPI payments, including ICICI Bank, HDFC Bank, Axis Bank, State Bank of India andJio Payments Bank.

“People can send money on WhatsApp to anyone using a UPI-supported app,” said WhatsApp in a blog post, adding that the service is now available on the latest version of iPhone and Android.

A significant challenge

While GooglePay and PhonePe, along with Paytm, have till now dominated the UPI segment in the country, WhatsApp is expected to pose a significant challenge to them.

Industry experts point out that almost all smartphones users in the country use WhatsApp, and it could quickly take over the dominant position in payments. Also, users do not even have to download a separate app for payments – the ease of use in sharing photos, contacts and location has already been established.

Mandar Agashe, Founder and Managing Director, Sarvatra Technologies, called the launch of WhatsApp payments a positive for the UPI ecosystem. “It is a popular app and has now offered an additional feature on the same app,” he said. Sarvatra works with ICICI Bank that partnered WhatsApp Pay in the pilot.

WhatsApp is estimated to have a 40 crore user base and, as of now, NPCI has allowed it to expand the UPI user base in a graded manner, starting with a maximum registered user base of 2 crore.

It had been running pilots of its payment service – WhatsApp Pay – for the last two years, but till now had not received permission to run it on a full scale due to concerns over data localisation.

Default UPI app

According to Ashneer Grover, Founder and CEO, BharatPe, WhatsApp has the potential to become the default UPI app for all. “NPCI has prudently capped the market share for all players. Without this, as much as 75 per cent of the market share could have been captured by WhatsApp,” he said.

NPCI had, on Thursday, decided to put a 30 per cent volume cap for third-party applications offering UPI, effective January 1, 2021, to help to address the risks and protect the UPI ecosystem as it further scales up.

The move has, however, see mixed reaction from players.

“Digital payments in India is still in its infancy, and any interventions at this point should be made with a view to accelerate consumer choice and innovation. A choice-based and open model is key to drive this momentum. This announcement has come as a surprise and has implications for hundreds of millions of users who use UPI for their daily payments, and could impact the further adoption of UPI and the end goal of financial inclusion,” said Sajith Sivanandan, Business Head, Google Pay and Next Billion User initiatives, India.

PhonePe did not comment on an email query by BusinessLine .

But UPI transactions are also growing and crossed 200 crore in October. The entry of more players and a cap on market share could help balance risks.

The RBI report on ‘Payment and Settlement Systems in India: Vision 2019 – 2021’ said it expects payment systems such as UPI and IMPS to register average annualised growth of over 100 per cent, and the number of digital transactions could increase more than four times from 2,069 crore in December 2018 to 8,707 crore in December 2021.

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