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Current Affairs

NPCI clearance for WhatsApp Pay

Date: 18 April 2022 Tags: Basics of Economics

Issue

The National Payments Corporation of India (NPCI) has given clearance to WhatsApp to add 60 million users to its UPI-based payments service WhatsApp Pay. 

 

Background

The move is likely to increase the total permissible number of users on the platform to 100 million. 

 

Details

The company has included significant features on ‘payments on WhatsApp’ across India including – “India-first” features. 

The move will allows WhatsApp to take on heavyweight rivals such as Walmart-backed PhonePe and Google Pay.

The regulating authority has prevented skewing the advantage in its favour by limiting the number of users to be allowed on the platform.

WhatsApp currently has about 500 million users in India. By allowing all users permission at once would reduce competition in the market.

 

Implications for other players

NPCI has made it compulsory that no platform should handle more than 30 per cent of total transaction volumes of UPI on a three-month rolling period basis.

It has given companies a time until the end of 2022 to comply with the directive. PhonePe currently has a market share of 49% and Google Pay 35%.

The gradual permission for WhatsApp to increase users could restrict their share and result in a less skewed market.

 

Potential for WhatsApp

WhatsApp currently has a market share of 0.05 per cent of UPI transactions and the new directive from NPCI could allow it to push aggressively to bring new merchants.

The company is making efforts to push its payments service in rural regions of the country. This would increase its user base.

 

Future of UPI

UPI has the potential to handle a billion transactions a day in the next 3-5 years. The AutoPay feature has seen increased adoption.

The announcement by UPI to include feature phones without an Internet connection is expected to open up the payments system to more than 40 crore individuals. 

 

Unified Payments Interface (UPI)

UPI is a real-time payment system developed by National Payments Corporation of India (NPCI). It is regulated by RBI.

 

National Payments Corporation of India (NPCI)

The NPCI is the specialised division of Reserve Bank of India created for operating retail payments and settlement systems in India.