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This article is written by Sachin Deepak Mayekar, from Government Law College, Mumbai.

Introduction

The launch of Whatsapp payments in India is a path filled with many hurdles. It has been on beta testing mode since April 2018. Recently in the first week of May, when it was finally announced that Whatsapp payments would go live by May end, another complaint came up against Whatsapp which was filed in March 2020, with the Competition Commission of  India(CCI), adding to yet another hurdle. An allegation was made against Whatsapp for abusing its dominant position by offering payments services to its messaging app users.The complaint firstly alleges that Whatsapp is using its dominant position as a leading messenger app in India for its own advantage. It is offering the Whatsapp payments service in the Whatsapp messenger app itself and is not launching a separate app for digital payments. Secondly by doing the above, it is forcing the Whatsapp users in India to use its payments service.

How dominant is Whatsapp

Examining the above contentions, Whatsapp messenger has a 400 million user base in India. This user base is much higher than other major digital payments players(Google Pay, PhonePe, Paytm) in India. This definitely puts Whatsapp at an advantage in the Indian digital payments market as compared to other players,when it will be fully rolled out. It is so because Whatsapp does not have to think about customer acquisition after launching payments feature as their customer base is readily available and are highly functional. Whereas if we look at other players, then they have started as a standalone payments app. They focused on cashbacks, discounts, loyalty programmes, merchant onboarding (QR Code Distribution) for customer acquisition. Despite all these efforts from the last four to five years, these players don’t have the user base, individually and even combined,that WhatsApp messenger has. So this is like a 100 meters race where Whatsapp is already standing on fifty metres and others are yet to reach even half of that distance. Thus Whatsapp has a great headstart compared to other major players in the digital payments space. But these headstart is just one of the required ingredients for Whatsapp payments to dominate the Indian digital payments landscape and not a full recipe of domination and harming the competitors.

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What does the competition law say

Further the Competition Commission Act 2002, defines “Dominant Position as a position of strength enjoyed by an enterprise, in the relevant market in India,enabling it to operate independently of competitive forces prevailing in the relevant market or affecting its competitors or consumers or the relevant market in its favour”. Here Whatsapp does have a dominant position owing to its 400 million user base. Also it can operate independently and affect other payment apps negatively to attract their customers and the digital payments market on its side. Reliance Jio and Facebook’s recent deal can further fuel this. But to decide whether it will really enjoy such a dominant position or not, it has to be launched on a full scale basis in India and be operational for a few months. Then only it can be assessed whether it is negatively affecting its competitors or not. This is also stated in Section 4(2) of the Act that ‘there shall be an abuse of dominant position’. So abuse of dominant position must have been committed rather than predicting the possibility of it being committed in future.

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Payment apps not just for payments anymore

The existing payments players like Paytm, Phonepe, Google Pay have not restricted themselves to just payments but they have also diversified in many other fields and offer diversified services to its users. For instance, Paytm is the oldest player with a good head start in the digital payments space in India and despite being the frontrunner, it is far behind Google Pay and Phonepe( who were launched years after Paytm) in the UPI(Unified Payments Interface) Payments Space. Google Pay and Phonepe each have more than 300 million UPI transactions per month and Paytm has only around approximately 150 million transactions every month. But still the overall transaction volume of Paytm is extremely higher than Phonepe and Google Pay(see here). This is due to Paytm’s diversification in various categories be it the Paytm Mall, Paytm Money, Paytm Movies, Paytm Payments Bank etc. This diversification has helped Paytm to absorb its poor performance in the UPI Payments space and come as a frontrunner when it comes to overall transactions as a fintech app. Also Phonepe and Google pay are fastly diversifying in various areas through mini apps and spot features(see here).Thus trying to reduce the impact or harm caused by any new dominant entrant. So the impact of WhatsApp payments which is based on UPI is definitely a bit overhyped given the fact that its competitors are way ahead in the digital payments space and are no more just a payments app only, due to their wide diversification. Further, the competitors in these fields have been operating since half a decade, so they have the requisite experience and also enormous data with respect to customer behaviour patterns and their interests. Their share in the UPI payments space might reduce but overall they won’t be affected much due to diversification as seen in Paytm’s Case.

Is integration necessary

Second allegation is about forcing the Whatsapp payments service on the users. Other payment players in this field were launched as a standalone payments app. But Whatsapp is integrating payments features in its messenger app. This means it is not launching a separate app for payments like the way it launched a separate app for business, i.e Whatsapp Business. Hence no option is left to the user for downloading the payments app of his choice, which he has while downloading other payment apps(Except Amazon Pay and Truecaller Pay). He cannot choose whether to download Whatsapp payments or not to download Whatsapp Payments. This is extremely critical in a way that we have the experience of  Truecaller UPI mishap in July 2019, where android users with Truecaller on their phones were registered to the Unified Payment Interface (UPI) account without their permission. They received text messages saying their registration for the UPI app has been initiated and their bank account was linked to ICICI Bank’s UPI interface. This was a huge data breach where NPCI (National Payments Corporation Of India)  had to bar Truecaller from onboarding new users on its UPI platform(see here). Due to such integration users don’t even have the option to exit or delete or uninstall the app, despite it being a threat to their data privacy and its security. Further, even Whatsapp had several data breach incidents including the recent Pegasus spyware case which was not reported to the CERT-IN. Whatsapp payments full rollout has been on a pending status due to its non compliance with Indian data localization rules. This raises questions about the data privacy and data security of users post integration of payments service in the Whatsapp messenger. It is also against the principles of privacy that were established by the Supreme Court in its Aadhaar Judgement. The launch can also be put on hold till the Personal Data Protection Bill 2019 comes into effect to ensure complete compliance and also adherence to the data localization rules.

International references from which we can learn

There are also international references from which we can learn and act in accordance. Recently even Brazil has suspended Whatsapp payments in the country a week after its rollout. Brazil’s Central Bank took this decision to preserve an adequate competitive environment in the mobile payments space and to ensure functioning of a payment system that’s interchangeable, fast, secure, transparent, open and cheap. The Bank said it hadn’t had the opportunity to analyze Whatsapp’s payment service prior to its rollout. This situation is quite similar to India. A key point to be noted is that the central bank suspended Whatsapp payments to protect it’s own payments service named ‘PIX’ which was about to launch in November 2020. Whereas in India, the situation of the government’s Bhim app is extremely poor. Various news reports have stated the fact that Bhim app’s contribution to the UPI Payments market is less than two percent. Whereas Paytm, Phonepe, Google Pay contribute 99% of the UPI market share. Despite this there are no efforts from the government to increase Bhim’s market share. Although one can say that even the above major players run on the NPCI’s UPI system. Thus indirectly promoting Bhim only. But we have to also consider the fact that Paytm and Phonepe are heavily funded by chinese investors(Softbank, Ant Financial, Alibaba. There can’t be data sovereignty when there is no financial sovereignty. This is a huge concern as the sensitive financial transactional data of the Indian citizens is handled by Chinese funded payment apps. Whereas our own payments system is being slowly buried. This should be addressed at the earliest as possible as currently there is an absence of proper data protection law and also with respect to the current wave of banning chinese products in the country. It is still not understood why Reserve Bank Of India (RBI) and NPCI are still silent on these facts and not reacted just the way Brazil Central Bank did.

Conclusion

In the end, It is no doubt that launching Whatsapp payments will be a great revolution in the digital payments field in India. Further accusing Whatsapp of violating the competition norms is too early, when it has yet to be launched on a full scale basis and operated for a few months. Also violation must be existing and to be shown with proof according to the competition act But the data security concerns also need to be addressed on a priority basis, if Whatsapp payments feature will be integrated in the Whatsapp messenger app. There should be a complete adherence to the Information Technology Act 2000, Payments and Settlement Systems Act 2007, Data Localization Rules and other rules and regulations. The Personal Data Protection Bill 2019 should also be adhered to when it comes into effect for ensuring complete compliance. So it is very interesting to see the future events with regards to Whatsapp payments in India.

References

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