The Indian government has approved WhatsApp Pay, a secure payment system used in making money transfers on the WhatsApp platform, the company announced.
“Starting today, people across India will be able to send money through WhatsApp. This secure payments experience makes transferring money just as easy as sending a message,” WhatsApp said in a blog post. “People can safely send money to a family member or share the cost of good from a distance without having to exchange cash in person or going to a local bank.”
The payment feature was designed in partnership with the National Payments Corporation of India (NPCI) using the Unified Payment Interface (UPI), an India-first, real-time payment system that enables transactions with over 160 supported banks, according to a statement from WhatsApp.
The instant message app explained that it is necessary to have a bank account and debit card in India to use the WhatsApp Pay feature, which can be downloaded in the Google and Apple stores.
“WhatsApp sends instructions to banks, also known as payment service providers, that initiate the transfer of money via UPI between sender and receiver bank accounts. We’re delighted to be working with five leading banks in India,” the instant message app explained.
WhatsApp said it is working with ICICI Bank, HDFC Bank, Axis Bank, the State Bank of India, and Jio Payments Bank, to facilitate payments, and people can send money to anyone using a UPI supported app.
The payment feature is designed with a strong set of security and privacy principles, including entering a personal UPI PIN for each payment.
WhatsApp said they believe the combination of UPI’s unique architecture can help local organizations address some of the key challenges of our time in the future, including increasing rural participation in the digital economy and delivering financial services to those who have never had access before.
“We are excited to join India’s campaign to increase the ease and use of digital payments, which is helping expand financial inclusion in India,” WhatsApp said.
The journey of WhatsApp Pay started in June, when Facebook founder and chief executive Mark Zuckerberg announced the launch in Brazil. However, Brazil’s central bank suspended the feature, just a week after it was launched.
Facebook had partnered with MasterCard and Visa to facilitate WhatsApp Pay in Brazil, but banks in the South American country were not having it.
Following Brazilian central bank’s intervention, banks in the country had asked MasterCard and Visa to suspend money transfer on WhatsApp app. Failure to comply with the order would subject them to fines and administrative sanctions.
But while Brazilian central bank was halting the use of the instant message payment feature, it was being tested in India. It appears that Facebook learned from its ordeal in Brazil and changed its approach in India.
The use of UPI and partnership with the NPCI and local banks in India appears to have removed any government’s concern that the WhatsApp payment feature will disrupt the nation’s banking system. It was the reason many believed the WhatsApp pay feature was halted in Brazil.
UPI, due to its interoperability, has become dominant in the digital payment ecosystem that is fast becoming a multibillion dollar market. Industry report said last year that the market is expected to leap from $64.8 billion in 2019 to $135.2 billion in 2023.
Unlike many other mobile wallets and payment systems, where both the user and merchant need to have the same wallet platform to perform transactions; UPI users have the ability to carry out transactions using different platforms that are built on the framework.
In India, all major payment platforms use the UPI framework which processed more than 2.07 billion transactions in October; a giant leap from its $1.08 billion the previous month.
UPI has about 190 lenders in India, which will make it easier for WhatsApp to penetrate the booming payment market. Zuckerberg said the payments feature is available in 10 Indian regional language versions of WhatsApp.
“With UPI, India has created something truly special. It’s opening up a world of opportunities for micro and small business that are the backbone of the Indian economy,” Zuckerberg added.
But with the vast payment platforms in India, including Google Pay, Walmart’s PhonePe and Alibaba’s backed paytm, WhatsApp Pay is going to face fierce competition.
Notwithstanding, the launch in India has a set trajectory for other countries that may put many payment startups out of business.