Popular messaging app WhatsApp forayed into the payments space in India last week, and Paytm's Vijay Shekhar Sharma is not a happy man.
The founder of the country’s largest online payments platform alleged, in a tweet, that Facebook-owned WhatsApp, with more than 200 million Indian users, is getting preferential treatment from the National Payments Corporation of India, flouting security norms, and using unfair means to grab a slice of the cashless transactions market.
Sharma, who likened WhatsApp’s foray to its parent Facebook’s Free Basics that fell afoul of net neutrality principles, called the social-media giant “evil trick masters”.
WhatsApp and the NPCI were yet to respond to BloombergQuint’s emailed queries.
Facebook is not doing things the way it is supposed to be done, he told BloombergQuint in an interview. It is looking to build a closed ecosystem, while India has championed an open ecosystem, Sharma said. Paytm has about 330 million users.
WhatsApp is piloting peer-to-peer cash transfers, joining Google Tez and the government’s BHIM app, banks and online wallet companies. Cashless transactions have grown after demonetisation in November 2016, especially through Unified Payments Interface that allows inter-bank payments. What gives WhatsApp an advantage is that India is already its biggest market with more than 200 million active users a month.
Here’s what Sharma thinks WhatApp’s foray means for digital payments in India:
Judging from your recent tweets, you’ve been critical about WhatsApp’s foray into the digital payments space in India and you have accused WhatsApp of killing the “open UPI platform”. Why do you think so?
Well, I think if you look at India and IndiaStack, it has been a platform that allows any company to build payments systems and various financial services systems. It also has few guidances. For example, if you want to build a UPI system, you must have the ability to send money to an Aadhaar-linked account. You must have the ability to receive or send money agnostic of the fact whether the customer is on your platform or not, and you must have a login password, authentication, and security. All of this is not there when you look at the WhatsApp product. I found it smooth and flawless except that it is exactly because it is violating every other obligation. We wish we could do that but we were asked not to let this happen. Facebook is tricking us again and it is doing things which are not supposed to be the way they are. The thing is Facebook must not do things they did in the Internet access way in the payments space. They should live and abide by all the suggestions and guidances that are there in India.
You’re also alluding to the fact that they’ve gotten some sort of preferential treatment. According to you, what kind of preferential treatment was meted out to WhatsApp? Also, why do you think Paytm couldn’t go all out with their UPI offering? Are you saying Paytm was restricted in some sort of way?
Yes, absolutely. Paytm beta rollout required us to complete every end-to-end feature, including features that customers may or may not need. For example, a feature like ‘Request money’ or paying to Aadhaar ID and by the way we assumed there would not be many payments but they are happening on our platforms. So, there was an end-to- end list that we had to comply with and Facebook is able to launch a payments platform just by few of those and that too in a work flow which is blatantly violating even the basics of security in this country. It is ridiculous to see that the whole of our banking system is now open on a WhatsApp login and there is no login by the way. It’s just on the WhatsApp app, there is no login password, there are three factors of authentication in this country and (in this case) none of them have been applied for.
Facebook is used to tricking systems to its advantage. It does that openly in the rest of the world. It will take content from content providers and trick them. It will take access from access providers and trick them. And I remember Sunil Bharti Mittal talking about it in Barcelona saying, “If you want to do this philanthropy, please buy data from us and give it to the consumer for free.” Exactly the trick! In the same scenario, here is another Facebook trick in other words saying that consumers can get a superior experience without going through the compliance obligations of every other kind which could be detrimental, starting from security to every act of fraud that can happen in this country. Well, here it is. Facebook wants to do these things and when we talked to NPCI, they said it will be corrected till the time it is launched. But, that has never happened in this country. People launch things in beta and they remain in beta.
When it comes to the digital payments landscape, some would say the way in which WhatsApp has come onto the UPI platform and the sort of user experience it provides, that this is the fillip that the payments space needed? If we look at this from a neutral standpoint, considering WhatsApp’s user base of over 200 million customers in India and it’s UI, don’t you think it’s a positive move when it comes to making digital payments pervasive and ubiquitous in the country?
I think there is no secret about it. If they would have spent any penny on doing the same I would have believed it. The problem is we have spent Rs 10, 000 crore and more in this year alone to progress the payments space in the country. And here’s our friend (WhatsApp) who comes in and not even a software developer sits in the country, no server sits in India, no regulation comes in India, no tax filing happens in India. And you’re telling that it could be good for this country? Yes, I remember Free Basics was pitched in the same way. It could just give those who don’t have access to the internet some access, except that you don’t call it internet! You could do the payment but don’t do the insecure payment like you are doing. That’s what it is. It gets disguised. All agendas are disguised under a cover of good. That’s what this is.
The argument you make about WhatsApp sounds uncannily similar to what was being said when Facebook came out with Free Basics in its different avatars. Why do you think it this tantamount to the internet access effort?
Google is built on an open internet ecosystem. Facebook is inherently built on a closed ecosystem. That is why Facebook’s thought process always works to ask the question - “How can I close it? How can I wall-garden it? How can I conclude it within myself?” And they have disproportionate amount of distribution which is to their advantage and also the money. This continues to be a closed ecosystem. Well, you could build your own closed ecosystem. There is nothing wrong with that. Except you should follow the rules and regulations for building an open ecosystem because you are using an open rail. You could take and build anything you wanted to do. But not in this scenario, my friend.
The problem is that India championed an open ecosystem. IndiaStack championed an open ecosystem. UPI was supposed to facilitate payments between any bank and customer. Now, it is not. The very fact that it is an open platform is giving birth to a Facebook platform that is a closed loop system. Please, do not let that happen in this country. And they are not contributing in any way to this country. Not even the tax on the money they are making in this country. I am not going to start on this “foreign versus Indian” rhetoric but I just want to remind you that companies are treating us as a consumption market and not even as an investment market. And then you talk about servers, security.
I’m sure you know about the fraud that happened in PNB. The SWIFT system was disconnected from the core banking system. If the systems are not aligned and kept together, they could create a ton of frauds. WhatsApp’s system will never connect to a bank’s system. There will be two different systems. They don’t even have a machine and API system. We are opening to a fraud here.
When you talk about the issues you have with the security infrastructure of using WhatsApp on the UPI framework, how is the Paytm product more secure or any safer than using WhatsApp payments?
The Paytm system is owned by Paytm Payments Bank, which obligates itself to be running all kinds of compliance obligations of keeping the data within Indian boundaries, access controls that are there of PCI, DSS and everything else. This doesn’t apply to WhatsApp. It is an independent messenger app. It’s not a financial services app, it does not get regulated by any measure. It is a consumer content app, a social network app. Should I say that we are more secure than them? Answer is that I’m not the best judge of that. I am just saying that they are not obligated to bother about security.
But obviously, they have been in talks with the NPCI for so long working on this product and there must have been some checks and balances put in place. They have to have followed procedural guidelines to get this product to market?
I can tell you this. They (Facebook) are trick masters, they have always done this, cheap and evil trick masters.
Okay, you are calling them evil trick masters. But when it comes to security, at the end of the day, we know how the UPI works?
I will help you understand. Are we trusting a company whose CEO knows that I will keep my camera blocked because they know by themselves the amount of data they track from a customer, and now you are adding the payments data! You were talking about privacy problems a few days back in this country, but we are not talking about privacy problems in this case. I don’t have to tell you all this. This sounds like (me) whining.
I am very glad that we are having this conversation. We are getting loads of comments as well. To just put things in a nutshell, these concerns are very any other app out there. Even in China, people have these issues saying why does Alibaba have so much of my data or Amazon in the U.S. So these privacy concerns surrounding data exist wherever there is data collection on a large scale?
Absolutely, I am trying to help you understand that here is an entity on whom you do not have any control in this country. At least in China and in the U.S., they have a control over some things. At least in European Union, one can fine them. Do I have to say anymore? They don’t have a sales team in this country. Suck the money out of Indians and take it tax free back home.
I want to ask you one thing only based on a technical standpoint. You say procedurally there were some lapses and guidelines were not followed, there were some lapses in this case. Do you want to elaborate on that point?
I just want to tell you one thing. There are ‘n’ number of things to be shared and there is a long list. The justification that is coming is that by 31st March, they would implement everything else. Now, I will wait for login and password on WhatsApp on 31st March. Public announcement: I would like to see that. And right now, it is being claimed that four banks have given their undertaking that we will take the risk if some fraud happens. Wow! Banks can take tens of thousands of crores in this country. I didn’t know.
Since this is live, I just want to take a couple of comments and let’s get your take on them very quickly. One viewer is saying when the going was good, now we are asking questions like “What’s ‘appening”. Another user is saying WeChat payments is working in China. Why are we so concerned? Paytm has got a bigger rival now.
Let’s answer each one of them. First question about WeChat being there in China. Yes, please see, login, passwords, authentication and security. Not the ‘download app and go’. Indian security, let’s add that. Now we are talking about what’s ‘appening now, the going was good. Answer is there are trillion dollar companies such as Amazon and Google operating in this country. And they have the money obligations to raise. If we talk about what’s wrong, we are talking about the partiality, cheap trick played by Facebook. Going will be good and going will be challenged. This is the way of life. It’s not even a question of whether it is an Indian or international company. This is just a question of your mojo being checked against everybody else’s mojo. Today, we feel privileged that we can be in front of this fight that’s happening. At the same time, we want an equal fight for every dog in this game. We do not want superior advantage to some and disadvantage to some others. So what’s happening is Whatsapp is getting an advantage because it is coming as a Facebook company. And what’s the third question...
Essentially the same, that Paytm is worried about a bigger rival...
Yes, essentially, because Paytm is run by a paranoid dude, this guy. This guy is paranoid, at a very difficult scale with everyone and anyone. We are paranoid about a company we may not have heard of. We are not paranoid about our peers alone and the ones we have visibility of. We are paranoid about everyone else. So it’s not even a question. Now, Paytm and Amazon Pay had a different situation, customers had a brand name, the e-Commerce company and we never said anything about Amazon. So it’s not about WhatsApp being a bigger player than Amazon today. It is a question of favoured versus unfavoured.
We’ve documented your grouse here and you ‘ve made some fair points. But when it comes to users adapting these things, what would your message be to the NPCI?
You should not change the rules for different people differently. Nothing else and there is no secret about this. Better product survives at the end. No protection can ever be protection. The world is an open and fair market. I wish it to remain this way. No advantage for an Indian, foreign or a Facebook company or whatever the evil they are. Please, this is the most evil company in the world.