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Technology

WhatsApp's new India payment feature draws flak from Alibaba-backed Paytm

Paytm accuses Facebook's messaging app of creating closed payments system

WhatsApp last week rolled out a beta-version of the feature to a select few users in India.   © Reuters

MUMBAI (NewsRise) -- WhatsApp's new payment feature in India has prompted a backlash from China's Alibaba Group Holding-backed Paytm that alleged the new entrant is abusing a government-supported open platform to build a closed system.

The Facebook-owned messaging app last week rolled out a beta-version of the feature to a select few users in India. WhatsApp's new feature works on the government's Unified Payments Interface, a real-time payments platform developed by the National Payments Corporation of India, or NPCI, to drive digital transactions in the country.

Digital transactions have been surging in India, luring several global technology giants, including Google, Amazon.com, and Apple. Last year, Google launched its payments app called Tez, which already has 12 million users in India. Alibaba was the earliest to enter India's payments market through its financial affiliate Ant Financial that picked up a stake in Paytm more than three years ago. Over the years, Paytm established its dominance in the country, acquiring more than 300 million registered users.

WhatsApp, which had more than 200 million monthly active users in India at the end of last February, is one of the most popular messaging apps in the country. Experts believe that WhatsApp's reach among the masses may give its payment platform an edge over existing players.

Over the past few days, Paytm has raised a furore over WhatsApp's new payments feature, accusing it of abusing UPI's open platform to create a closed payments system.

"We believe India is an open market that welcomes technology and business innovations from across the world," Deepak Abbot, senior vice president for Paytm, said in a statement. "However, WhatsApp's UPI payments system is a classic case of a large company with dominating distribution abusing an open platform via custom-implementation to gain undue advantage."

WhatsApp's new offering ignored the regulator's guidelines to have a password as an additional factor of authentication vital to protect money transfer, Abbot said. It is also not possible for a WhatsApp user to transact with another UPI app user on Apple's iOS operating system, while the option is hidden on Android version, he said.

The digital payments regulator NPCI and a spokeswoman for WhatsApp didn't immediately respond to e-mailed queries.

Meanwhile, some other established digital wallet providers such as Mobikwik welcomed WhatsApp's new platform, saying consumers are the real beneficiaries of the new payments feature.

"WhatsApp's UPI integration will, in fact, do well in expanding the entire digital payments ecosystem," Bipin Preet Singh, co-founder and CEO of Mobikwik told Moneycontrol website.

The scramble for India's digital payments market comes at a time when high-speed internet is fast catching up in the south Asian country amid the proliferation of smartphones. In 2016, billionaire Mukesh Ambani's wireless venture rolled out fourth-generation internet services virtually free for initial subscribers, stirring a price war among telecom operators.

According to a Boston Consultancy Group report, India's digital payments industry will be worth about $500 billion by 2020.

--Dhanya Ann Thoppil

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