Why WhatsApp Pay Has Not Been Able To Roll Out In India?
There are conspiracy theories galore as to why WhatsApp, the messaging application of the global social media monopoly, Facebook Inc., has been unable to offer a mobile internet-based payments service to its 400 million-plus users in India.
Is it on account of lawsuits pending before the Supreme
Court? Are two organisations, the country’s central bank and apex monetary
authority, the Reserve Bank of India (RBI) and the National Payments
Corporation of India (NPCI), the umbrella body vetting online retail payments
in the country, standing in the way of WhatsApp Pay getting a final green
signal after it received their approval to start trial runs in February 2018?
Are those in power in New Delhi exerting political pressure on Facebook, among
the biggest corporate conglomerates on the planet?
The global digital monopoly is currently facing a lot of
flak over allegations that its top officials in India have been complicit in
promoting hate speech by functionaries and supporters of the ruling Right-wing,
Hindu nationalist Bharatiya Janata Party (BJP).
Is the Facebook-owned WhatsApp being “persuaded” to change
the contours of its association with partners in India, following its $5.7
billion (Rs 43,574 crore) investment in a 9.99% stake in Jio Platforms, part of
Reliance Industries Limited (RIL), the country’s biggest private corporate
entity headed by India’s, Asia’s––and one of the world’s––richest men, Mukesh
Ambani? (Incidentally, this was the biggest deal struck by Facebook since its
$22 billion buyout of WhatsApp in 2014.)
Whatever be the answers to these questions and the truth
behind the intense speculation, one fact is simple to comprehend. WhatsApp,
which had been operating in India even before it was acquired by Facebook in
February 2014 and became the world’s most-used messaging application the
following year, has not earned a single rupee so far in this country that has
its biggest number of users after having spent undisclosed (but substantial)
amounts of money in India.
“Facebook is not a philanthropic organisation and it is
desperately keen to earn big bucks by monetising its popular service in the
country where it has the largest number of users, well over 40 crore,” said a
Mumbai-based information technology analyst on condition of anonymity, adding:
“Having been shut out of China, it is eyeing India lasciviously and will do
anything to get a toehold into our burgeoning digital payments market.”
This analyst, like quite a few of the dozen individuals we
spoke to over the past few weeks to put together this article, said there were
“too many unanswered questions” and “rumours” about top government officials
putting pressure on WhatsApp to accede to demands for “trace-ability” of voice,
still pictures and video messages, ostensibly to book criminals and those
accused of committing heinous crimes, but also to enable “mass surveillance”
operations. WhatsApp has consistently claimed that its “end-to-end encryption”
technology does not allow it to enable government agencies to conduct such
operations that may be considered “covert.”
WhatsApp’s Unified Payments Interface (UPI) feature has been
in limbo since it was introduced in the country for “beta” trials for around a
million users more than two and a half years ago. India is the first country in
the world where WhatsApp has tested its digital payments service. However, a
full-scale launch of WhatsApp Pay, possibly in partnership with one of India’s
largest private banks, ICICI Bank, remains uncertain for the time being. Why?
That indeed, is a billion-dollar question.
UPI is a system that powers multiple bank accounts into a
single mobile application (of any participating bank), merging several banking
features, seamless fund routing and merchant payments under one “hood.” Among
the mobile payments applications that are currently using the UPI system in
India are PhonePe, Google Pay and PayTM.
It’s not just in India that WhatsApp Pay is struggling to
launch itself––its digital payments service was rolled out in Brazil on June
25, a week before the central bank of that country suspended trial runs after
stating that there was a possibility of damage to the payments system, besides
raising concerns about data privacy, efficacy and competition. Brazil currently
has over 120 million users of WhatsApp and is led by the Right-wing President
Jair Bolsonaro.
On February 11, 2019, Sourya Majumder and one of the writers
of this article had published a report in NewsClick titled “A Mobile Payments
Monopoly With A Beep?” that pointed out how a call for bids by the NPCI to set
up proximity-based mobile payments facilities potentially facilitated the
formation of a private monopoly that could not just be illegal but also
disproportionately benefit a few, notably the corporate groups led by Anil
Ambani, Nandan Nilekani, co-founder of Infosys, and a key associate of the
ruling dispensation, Arvind Gupta. The proposal was placed on hold and remains
in limbo.
Soon after the NPCI, an initiative of the RBI, announced on
February 16, 2018, that WhatsApp Pay had been granted approval for beta testing
of its UPI service in India, the Union Ministry of Electronics and Information
Technology (MEITY) wrote two letters to the NPCI in March and May that year
raising issues relating to the data storage policy of WhatsApp and whether user
data would get shared with its parent company, Facebook, based in Menlo Park,
California. MEITY also asked if the proposed payments service would use RBI’s
two-factor authentication process, a security process in which users provide
two different authentication or verification factors.
PETITIONS IN SUPREME COURT AGAINST WHATSAPP
In July 2018, a Delhi-based non-government organisation
(NGO), called the Centre for Accountability and Systemic Change (CASC), filed a
petition in the Supreme Court alleging, among other things, that WhatsApp had
failed to comply with the RBI’s data localisation rules. Data localisation is
essentially a system that is supposed to prevent financial and personal data of
an individual or a corporate entity stored in a payments instrument, such as a
digital payments application or a debit card, from being shared and stored in
computer servers located outside the country of origin of the payments service.
WhatsApp had assured the apex court in May 2019 that it
would launch its full service only after following all RBI norms. In February
2019, a fresh application to the existing petition by CASC had been filed by
CASC wherein it was requested that the “unlawful trials” for payment services
be stopped by the Supreme Court.
A year later, on February 28, 2020, another writ petition
was filed in the Supreme Court against the social media messaging app regarding
its UPI-based payments service, this time, by another NGO named Good Governance
Chambers (G2C) which, by its own admission, is “unregistered.”
The petition has alleged “blatant and wilful violation” by
WhatsApp Pay of the “mandatory guidelines and regulatory norms forming the very
fundamentals on which the entire Unified Payment Interface (UPI) system of
India rests.” The petition further claims: “Such glaring violations pose a
serious threat to the monetary policy and laboriously set payment systems of
India, and which could also lead to (WhatsApp Pay) being a national threat to
the security and privacy of crores of citizens of India.”
In the petition, G2C claimed that WhatsApp has “consistently
defaulted” in complying with the directives issued by NPCI and RBI relating to
securing financial data of users, data localisation norms, the two-factor
authentication processes, and “to provide a system to log a complaint and
de-registration of a UPI-linked account.” The respondents in the petition are
RBI, NPCI, WhatsApp, ICICI Bank, MEITY’s Computer Emergency Response Team
(CERT) and the Union government.
The petition alleges that WhatsApp has not launched a
separate application for UPI-enabled transactions but embedded its “messaging
app” with a UPI-enabled feature. This, it is claimed, has resulted in “huge
risks to the financial data of the users as the primary messenger app of
WhatsApp despite claiming to have a secure and safe technology interface and
infrastructure, has been known to have failed to secure sensitive data of its
users and has subsequently even failed to assume accountability and
responsibility for the same.”
The petition mentions the controversy surrounding the
spyware Pegasus, owned by the Israel-based NSO group, which was used to hack
into the systems of 1,400 users in different parts of the world by exploiting a
vulnerability in its video-calling feature. In October 2019, WhatsApp had sued
NSO in a California Court for developing Pegasus. A Toronto, Canada-based
research body, The Citizen Lab, had published a report in September 2019 which
identified 45 countries where Pegasus may have been used to spy on citizens.
Besides Pegasus, the G2C petition also mentions the
Cambridge Analytica scandal. In March 2018, it was reported that Cambridge
Analytica, a voter profiling company, had illegally harvested private
information of more than 50 million Facebook users to help its clients win the
2014 American mid-term elections. The stolen information was reportedly used in
other countries as well, including India. A documentary film on the topic
titled “Great Hack” is available on Netflix.
It was reported in February 2020 that WhatsApp group chats
could be found using Google, as the search engine was allegedly indexing links
to conversations. The petition contends that there is “a very high possibility
of data leakage” as customer data may be available in such chat windows,
“leading to online scams and huge potential losses to the users.”
Given WhatsApp’s massive user base in the country, the
petition apprehends that “very sensitive user financial data can be easily
misused which can result in huge political and financial repercussions.” It
claims that if there is loss or theft of financial data of users, “not only
will it give rise to extensive and widespread … cybercrime which may not be
controllable, but also lead to reading and analysis of payment patterns, buying
behaviour, preferred modes of payment, etc. that may give birth to other
incidental issues of political, social and economic concern.”
The G2C petition claims that besides having the potential of
compromising national security and the privacy of citizens, the “bundling of a
messaging app with (a) payments interface which is vulnerable and has witnessed
multiple instances of fraud, cheating and privacy invasion should not be
permitted.”
Accusing WhatsApp of storing customer data in the
UPI-enabled apps by contravening RBI and NPCI rules, the petition alleges:
“WhatsApp also permits the sharing of QR (quick response) Code of the users
through the messaging service platform which can again form the basis of
multiple frauds and scams leading users to lose their hard-earned money in huge
numbers. This further causes customer data to form a part of screenshots on the
messaging app which is also not permissible.”
The petition claims WhatsApp stores payments data outside
India, that it “intends” sharing such data with its parent company, Facebook,
that it is not concerned about user privacy, is not following NPCI’s
“procedural guidelines” and RBI’s July 2013 circular that stated that the
two-factor authentication process in the UPI should include “a device
fingerprint (or unique way to identify the device) and the UPI Pin/Biometrics
of the user.” It further alleges that WhatsApp Pay does not provide the option
“to log a complaint with regard to transactions,” which is mandatory for a
UPI-enabled app, as per the NPCI guidelines.
The petitioner G2C urged the Supreme Court to “completely
ban the operations of WhatsApp in the UPI ecosystem” given its “current model
of operations.”
On May 13, a bench of the Supreme Court, headed by Chief
Justice of India S A Bobde, and comprising Justices Indu Malhotra and
Hrishikesh Roy, said that its hearings on the public interest litigation (PIL)
could not prevent RBI from allowing WhatsApp Pay to roll out its app in its
entirety. The petitions by CASC and G2C were also clubbed together by the
court.
WHATSAPP DENIES ALLEGATIONS, QUESTIONS CREDIBILITY OF
PETITIONERS
In an affidavit filed in the Supreme Court on June 2, 2020
by Shardull Suresh Shroff on behalf of Brian Hennessy, the director and
associate general counsel of WhatsApp, besides denying the allegations made in
the petitions, questioned the credentials of G2C. WhatsApp questioned why G2C
was formed just two months before the filing of the PIL petition.
It questioned how Law Juno, the law firm representing G2C,
was the same firm which represented lawyer Harshita Chawla who had complained
against WhatsApp in the Competition Commission of India (CCI) on March 19. (The
CCI is a regulatory body under the Union government which is meant to promote
and sustain competition, eliminate practices that have an adverse effect on
competition, protects the interests of consumers and ensure freedom of trade in
the markets of India.)
Chawla’s major allegation was that WhatsApp was misusing its
already prevalent market dominance to launch WhatsApp Pay. The CCI dismissed
Chawla’s complaint against WhatsApp on August 18.
WhatsApp had also told the Supreme Court that G2C may have
been involved with the complaint filed by Chawla but had not disclosed this
information in its petition to the apex court. While referring to similar
complaints made in the past that had been examined by the commission, the CCI
refused to dismiss the complaint against her because she may be associated with
the petition filed by G2C in the Supreme Court. It said: “The Commission notes
that though on first blush this argument looks attractive, it may not be
factually correct and is legally untenable…”
The domain names for Law Juno and G2C were also registered
on the same date, WhatsApp alleges.
“So what?” retorts Deepak Prakash, the Delhi-based
advocate-on-record for the NGO, in a telephonic conversation with one of the
writers.
It is not just those associated with WhatsApp who have
raised questions about G2C. An analyst who is familiar with the legal
proceedings told one of the writers of this article on condition of anonymity:
“It appears that the NGO was set up for the specific purpose of filing the PIL
against WhatsApp. It has set up social media accounts only recently and does
not appear to have a proper website or an e-mail address. Then, by its own
admission, G2C is an unregistered body. It is not surprising then that there is
speculation that the NGO was set up by rivals of Facebook and WhatsApp.”
The G2C petition has been filed by a 30-year-old “computer
engineer” named Satwik Chinta. We made several unsuccessful attempts to reach
him on the mobile number given in the petition.
One of the writers of this article paid a visit to the
“office address” of G2C given in its petition located at Preet Vihar in East
Delhi. The office is said to be located on the ground floor of a building that
has a co-working office area called “Co-Offiz” which provides spaces on rent.
The security guard present and a woman tasked with coordinating the renting out
of office space said they were not aware of any organisation called Good
Governance Chambers that had rented space.
Interestingly, in the complaint filed by Chawla before the
CCI, the same address of “Co-Offiz” in Preet Vihar has been provided.
A “MYSTERIOUS” PETITIONER
We asked advocate Prakash to answer a few questions
explaining the “mystery” behind the unregistered NGO called G2C. He claimed the
organisation had “socially responsible” individuals as its members, including
lawyers, computer engineers and scientists and a retired colonel of the Indian
Army. Prakash did not want to discuss why the organisation had not been
registered. “What matters is that the petition has been accepted for hearing by
the Supreme Court of India,” he added.
The advocate claimed that the reason why there was no one
available at the office was on account of the lockdown in the wake of the
COVID-19 pandemic. Why was petitioner Chinta not responding on his mobile
phone? “He is in his village in Odisha and there is no connectivity there,” he
claimed.
The WhatsApp affidavit in the Supreme Court states that one
Sahil Baghla registered the websites of both the law firm (Law Junmo) and the
so-called “think tank,” G2C. The affidavit also points out that Baghla had been
arrested earlier in connection with a $300 million “Bitcoin Ponzi scheme.”
WhatsApp further pointed out that in July 2019, Baghla was charged in the
Bombay High Court for alleged offences of cheating and criminal breach of
trust.
Prakash said that Baghla was out on bail, that he was indeed
a member of G2C, that he held a degree from an Indian Institute of Technology
and that he had done nothing wrong by registering domain names of websites. The
advocate said he was reluctant to discuss details as the case was pending in
court. “Read our petition,” he said over and over again.
In an affidavit submitted by RBI to the Supreme Court in
June, the country’s central bank stated that NPCI had informed it that WhatsApp
could now open its UPI platform for the Indian public. The RBI affidavit said:
“We would like to confirm that WhatsApp has satisfied the data localisation
requirements based on (MEITY’s CERT’s) auditor’s reports and we hereby are
giving ICICI Bank (the payment service provider bank for WhatsApp) the approval
to go live.”
The advocate for G2C said he was not satisfied with the
RBI’s response. “Who are the technical experts the RBI has consulted? We will
urge the Supreme Court to appoint an independent team of experts who are technically
qualified to look into the issues we have raised,” he said.
Prakash said Facebook and WhatsApp had many cases against
them in different countries across the world and had been fined on a number of
occasions.
The advocate had earlier been quoted by the Medianama
website claiming that WhatsApp was not worried about “...data protection and
sharing the financial data of millions of people”. “They (WhatsApp) have to
answer on merit now. They have to say that we are not violating (rules).”
Prakash added that it was not clear who in WhatsApp would be
responsible for dealing with customer complaints.
We contacted another advocate-on-record for the petitioner
G2C, Gaurav Sharma. We had some difficulty reaching him as there was another
advocate by the same name. When we got through to him over the phone, he
quipped: “I know seven persons who share my name!”
Sharma was reluctant to speak with us on the ground that the
“case has to be listed for final hearings before the Supreme Court.” “I cannot
say anything at this point of time,” he said.
We also spoke to two senior persons close to WhatsApp who
are aware of the legal proceedings that are going on. They spoke on condition
that they not be named since they were not authorised to speak to journalists.
One said: “WhatsApp cannot afford to be on the wrong side of the law. The NPCI
specifies rules pertaining to third-party applications that can reach out to
multiple banks. These would certainly be adhered to.”
Is there pressure on WhatsApp to “ditch” ICICI Bank since
Jio Payments Bank in the Reliance group has a controversial joint venture with
the country’s largest bank in the public sector, the State Bank of India?
As already mentioned, on April 22, Facebook announced that
it had acquired a 9.99% stake in Jio Platforms by investing $ 5.7 billion,
making the social media monopoly its largest minority shareholder.
Facebook’s chief executive officer Mark Zuckerberg told
analysts recently that the company’s partnership with Jio Platforms would help
“millions of small businesses in India” to do commerce on WhatsApp.
He said: “A big part of the partnership that we have with
Jio will be to wire up and get thousands of small businesses across India
on-boarded onto WhatsApp, to do commerce there… It’s very connected to what I
was just talking about around messaging commerce. A lot of people use WhatsApp,
especially in India. There’s a huge opportunity to enable small businesses and
individuals in India to buy and sell things through WhatsApp. We want to enable
that. That starts with enabling payments.”
Ajit Mohan, vice president and managing director of Facebook
India, told The Mint in April: “As you know WhatsApp Payments is in the middle
of a beta trial for a million users and we are hoping to get regulatory approval
but this collaboration (with Jio Platforms) is only meant to really fuel the
small business side of the economy.”
Is WhatsApp’s existing partnership with ICICI Bank coming in
the way of a closer engagement with Reliance Jio? Will a new arrangement now
have to be worked out?
Said a source in WhatsApp: “I don’t think WhatsApp’s
partnership with ICICI Bank will prove to be a deal breaker.”
Then, what’s coming in the way of the RBI giving its final
nod to WhatsApp Pay to roll out its payments service to all its users”
“Good question,” said one of the sources in WhatsApp we
spoke to.
“I wish I knew,” said the other person who knows about the
legal battle.
Over now to the Supreme Court of India.
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