Facebook-owned instant messaging giant WhatsApp will be compliant with data localisation norms over the next two months, post which it can roll out its much-delayed payments service here, says the National Payments Corporation.
Even after the launch of WhatsApp's payments service, it will take at least two years to reduce the cash dominance in the economy as the user base of digital payments must at least treble to 300 million to have any tangible impact on paring cash usage, the RBI-created NPCI's chief executive Dilip Asbe told PTI in an interview.
WhatsApp has been running a beta version of its payments service since last year in the country, and its official launch is being keenly watched by stakeholders, including its over 300 million users. Many think WhatsApp can help India emulate China's WeChat story, and help achieve the cashless payments objectives.
"There are still a couple of intermediaries where work is in progress. One is Google, second is WhatsApp. We believe WhatsApp will be fully compliant in the next two months' time," Asbe said.
WhatsApp has capped the number of payment service users at 1 million now as it is yet to fully meet RBI's data localisation norms which require foreign companies to store transaction and user data within the country and delete the same from foreign servers within 24 hours.
According to Asbe, a third-party audit by a firm empaneled by the RBI is currently underway to ascertain WhatsApp's compliance. "Once the auditors complete their probe, we will review the same and will see how to go ahead," he said.
Abse also clarified that he did not meet the WhatsApp leadership team when they visited the city recently. He also said that other applicants like Xiaomi, Amazon Pay and Truecaller have not been able to launch their payments services because of data localisation rules.
Citing a Niti Aayog survey, Asbe said over three-fourths of the financial transactions are under Rs 100 and this is the space where unified payments interface (UPI) has to make inroads to replace cash and one step in this regard has been increasing the acceptance points.
He hoped increased use of NPCI-developed UPI platform by intermediaries like WhatsApp will help grow the digital payments scene.
Currently, there are only 100 million users of digital payments and this must touch at least 300 million to have any material impact on cash in circulation, he said, underlining this as the real challenge.
On the acceptance side, he said there are 3 million points of sale (POS) machines and 10 million QR codes active now. However, there must at least five-fold growth in both if we are to see any significant reduction in cash usage, he noted.
He added that though the number of digital payments users has touched 100 million in the past three years, it will be a difficult journey to broaden the ecosystem.
"It will be difficult for all of us, including banks and non-banks, to get the next 200 million digital users onto the UPI platform," he said, adding that banks and fintechs should do more in this area.
Small value payments of under Rs 500 will be on UPI, while for the rest, cards will remain the mainstay, he said. Only 5 per cent of digital users use scan-based features for payments, while in China it is over 600 million a day, mostly scan-based ones, Asbe added.
NPCI has no plans to launch a third version of the UPI platform now, but there will be regular incremental changes such as PAN verification, which will be available within the next two months, Asbe said.
On reports about tax incentives being planned to push UPI usage, he said it may take some time as it involves sharing a part of GST revenue as discounts. He also favoured cashbacks to drive usage.
NPCI is also planning to take UPI overseas to help those travelling abroad make payments through digital means.
The services will be launched in Singapore and the UAE by March 2020 in the first leg and NPCI is already in talks with two more countries where there is a good concentration of expats and a support system for QR codes-based payments mechanism, he added.
Claiming good traction for its Rupay cards, Asbe said it commands 30 per cent market share both in volumes and value of transactions. The user base will move up soon as Axis Bank and ICICI Bank will be launching Rupay credit cards soon, he noted. SBI Card is already offers Rupay cards.
He also said banks are likely to miss the October 15 deadline set by RBI to settle faulty card payments by a few more weeks.