RBI, NPCI mull stricter checks for digital pay amid growing antitrust, data privacy issues

New Delhi: The Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) are examining whether the digital payments ecosystem needs tighter regulatory oversight, with the rethink prompted by growing antitrust and data privacy issues along with technology inadequacy of banks.These are also the primary issues that are holding back WhatsApp Pay’s permit to start operations in India, people familiar with the matter told ET. “WhatsApp Pay had reported complying with the RBI’s mandated data localisation laws, but there is a concern on the part of the authorities if the regulatory mechanism is adequate,” one of the people told ET.NPCI, which enables digital retail payment and settlement, had told the Supreme Court in August that WhatsApp Pay had fulfilled all its data localisation obligations, and had been given permission to commence the service. But the final approvals are still awaited as the regulators deal with the fresh concerns, the people said. 78864602RBI and NPCI didn’t respond to ET’s emailed queries till press time Sunday.WhatsApp may Start Payment Service in Calibrated WayWhatsApp Pay allows payments via WhatsApp’s messaging platform. It had received clearance for testing in early 2018.According to the people, at present the total number of users on the NPCI-operated Unified Payments Interface is about 100 million. WhatsApp alone has more than 400 million users and a bulk of them could switch to WhatsApp Pay as soon as the service is launched. “Will the UPI platform be instantly able to handle this load? Could this lead to antitrust issues? What regulations are required to avoid misuse or abuse by existing players and new entrants with the immense amount of personal data generated? — these are some of the concerns which are being studied and worked upon by the central bank and the NPCI,” another person familiar with the matter said.As reported by ET on October 21, a surge in online payments since the onset of the pandemic is leading to high rates of transaction failures and a pile-up in credit reversals, as banks aren’t investing sufficiently to upgrade their infrastructure since they have no incentive to do so.One of the options being considered is to give WhatsApp Pay approval to start the service in a calibrated manner. That would mean only a certain number of users would be allowed to use the service during a given period of time, which could then be ramped up slowly, one of the people said.Another issue is over possible violation of privacy rules and monetisation of data by tech companies without any benefit to the consumer, according to experts.Personal Info at StakeAs things stand, all the UPI-based payment platforms claim they do not have access to any personal information and that all transactions are encrypted, but the regulator wants to ensure if at a later stage, they could start using their algorithms to map consumer data, consumption habits and begin advertising.“After all, these companies are currently not charging anything but will look at ways to monetise their services... this is certainly not for charity,” one of the people ET spoke to said. According to the NPCI website, at present there are 21 UPI third-party apps including Google Pay, WhatsApp Pay (beta version), PhonePe, Mi Pay and Amazon Pay. All these services other than WhatsApp Pay had launched a separate app, so they had no users to begin with. WhatsApp’s service will allow the app’s existing 400 million users to send and receive money via the messaging platform.People aware of the matter said the central bank and the NPCI were likely to share their views on the matter with the Supreme Court, which is hearing a case on data-ownership issues, filed by Rajya Sabha member Binoy Viswam.The CPI leader has alleged that the current regulations had compromised the interest of Indian users by permitting Amazon, Google, Facebook and WhatsApp to participate in the UPI ecosystem without scrutiny. Brazil’s central bank in June had suspended WhatsApp Pay within a week of permitting the service in that country.

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