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November 8, 2020

Know how to send and receive money via WhatsApp Pay

by CA Shivam Jaiswal in RBI

Know how to send and receive money via WhatsApp Pay

Almost everyone in the world who has access to a smart phone is using WhatsApp. For the miniscule of people who don’t know what WhatsApp is, WhatsApp is free to download messenger application for smartphones. WhatsApp uses the internet to send messages, images, audio or video. The service is very similar to text messaging services, however, because WhatsApp uses the internet to send messages, the cost of using WhatsApp is significantly less than texting.

Now WhatsApp will also allow you to make payments, which the company said will be as easy as forwarding a message. Facebook-owned messaging app WhatsApp has received approval from National Payments Corporation of India (NPCI) to go live on its Unified Payments Interface (UPI) service. 

What is the role of the National Payments Corporation of India (NPCI)?

National Payments Corporation of India (NPCI), an umbrella organisation for operating retail payments and settlement systems in India, was an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India.

Considering the utility nature of the objects of NPCI, it has been incorporated as a “Not for Profit” Company under the provisions of Section 25 of Companies Act 1956 (now Section 8 of Companies Act 2013), with an intention to provide infrastructure to the entire Banking system in India for physical as well as electronic payment and settlement systems. The Company is focused on bringing innovations in the retail payment systems through the use of technology for achieving greater efficiency in operations and widening the reach of payment systems.

What do you mean by Unified Payments Interface (UPI) service?

Unified Payments Interface (UPI) is an instant real-time payment system developed by National Payments Corporation of India facilitating inter-bank transactions. The interface is regulated by the Reserve Bank of India and works by instantly transferring funds between two bank accounts on a mobile platform.

According to the data by the NPCI, the UPI transactions reached the Rs 207 crore (2.07 billion) transaction mark in October. These transactions are worth as much as Rs 3.3 lakh crore. There has been a steady rise in UPI transactions, with a reported 180 crore UPI transactions completed in September valuing to as much as Rs 3.29 lakh crore and 161 crore transactions in August.

This steady rise in UPI transactions are due to a variety of factors, which includes more online purchases and payments being done as people stay indoors due to the coronavirus pandemic, the festive shopping season and also the recent online sales on various shopping platforms including Flipkart and Amazon.

What permission has NPCI provided to WhatsApp?

  • NPCI has allowed the platform to scale its user base up to 20 million registered users from the 1 million currently.
  • The green light means that cap will be subject to review by NPCI at a later stage. However, WhatsApp will be subject to a cap on transactions conducted on the platform at 30% of total UPI volumes from January 1 following new rules issued by the NPCI for all service providers.
  • This cap on number of transactions was first discussed at NPCI more than a year ago, to keep in check the growing dominance of non-banking payments providers like Google Pay, PhonePe, etc in the UPI ecosystem.
  • Any of these platforms should not handle more than 30% of total transaction volumes of UPI on a three-month rolling period basis.
  • This would impede WhatsApp from growing beyond that point even if it was allowed to roll the service out to all of its 400 million+ customers.
  • Other apps like PhonePe and Google Pay, the market shares of which exceed 30% in terms of transaction volumes have been given time till 2023 to comply with the norms.

How will the 30% cap be computed?

  • The cap of 30% will be calculated on the basis of the total volume of UPI transactions that were processed in the preceding three months. This will be done on a rolling basis.
  • They also say that any existing players who are currently above the cap amount will have a period of two years to comply, in a phased manner.
  • At this time, PhonePe and Google Pay will be the most impacted, since both players are completing closely with each other with around 40% each of the total UPI transactions.
  • These guidelines will be applicable for all UPI players, including Amazon Pay, Mi Pay, Samsung Pay, Truecaller and more.

Who will be permitted to use WhatsApp Pay?

All of WhatsApp’s users with a bank account and a debit card in one of the 160 banks participating in UPI will be allowed to use the payments service.

However, now NPCI has restricted the user base to 20 million out of WhatsApp’s over 400 million. Given that WhatsApp is a non-banking payments service provider, it has tied up with five banks to enable the service — ICICI Bank, HDFC Bank, Axis Bank, State Bank of India, and Jio Payments Bank.

How can one send payments via WhatsApp?

  • To send money on WhatsApp in India, one has to have a bank account and debit card in India.
  • Open WhatsApp, click on ‘Payments’ in the attachment segment, authenticate yourself with the debit card number, create a UPI handle and generate a UPI pin.
  • Get on to the chat window with the person whom you need to transfer money to. Click on ‘attachments’, select ‘payments’, enter the amount to be transferred and authenticate usingthe UPI pin.
  • Just make sure that the receiver has updated the app to receive UPI payments.Even if the receiver does not use WhatsApp Payments, you can still send money to any UPI ID the person might have, as UPI is interoperable.
  • It is important to remember that the card that you use, as future transactions will happen from that bank account.
  • WhatsApp will send instructions to banks, also known as payment service providers, that initiate the transfer of money via UPI between sender and receiver bank accounts.
  • People can send money on WhatsApp to anyone using a UPI supported app.
  • The clearance will allow WhatsApp to offer service to 20 times as many users as it does now.This in turn will provide weightage to its plans to capitalise on its association with Reliance Industries.Reliance Jio’s grocery delivery service, JioMart, allows users to make orders through WhatsApp and with a payments service, the integration between the two platforms couldsee further augmentation.

Also, India’s UPI ecosystem is flooded with numerous players including payment service provider banks and third-party application providers such as Alibaba-backed Paytm, Flipkart-owned PhonePe, Google Pay, Amazon Pay, among others.WhatsApp has been operating in the space with a 1-million customer cap for the last two years, and clearance from NPCI means the messaging platform can scale its presence up in a segment that is controlled in majority by just two players.

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