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Facebook-owned WhatsApp has gained permission from the National Payments Corporation of India (NPCI) to expand its digital payment platform, called WhatsApp Pay, in stages, the first of which will see it work with 10 million users, according to The Business Standard.

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This follows a pilot, which began in 2018, that reportedly saw the platform reach almost 1 million users that June, with the service using the country's Unified Payments Interface (UPI), a platform that enables mobile bank-to-bank transactions.

WhatsApp Pay's expansion in India has been held up by issues with data localization, but it appears to be moving past them. WhatsApp has been working to comply with India's data localization rules, which require payments firms to store Indian consumers' data locally.

Meeting these requirements likely slowed WhatsApp Pay's expansion down, but the fact that it's been given permission to roll out further suggests that this may no longer be an issue for it. And if WhatsApp Pay's operations comply with the requirements once it scales to 10 million users, it may be able to fully roll out in India.

WhatsApp's huge base of Indian users may position WhatsApp Pay to succeed in the country, but it faces competitors that have already strengthened their ties with merchants.

WhatsApp Pay has the opportunity to leverage WhatsApp's tremendous network, much like WeChat Pay has with WeChat in China. WhatsApp had over 400 million users in India as of July 2019, and it may be able to easily recruit consumers to its payment services since WhatsApp Pay will be connected with the chat app.

This could help it scale quickly once it's able to fully roll out and enable it to amass a user base that can compete with other digital payment firms in India, like Paytm, which claims 150 million transacting users. Peer-to-peer payments (P2P) could be particularly important for WhatsApp Pay's success because they could easily be integrated into WhatsApp's chat features, allowing it to best leverage WhatsApp's established network of consumers. WeChat Pay used this tactic in China to take advantage of WeChat's millions of users and quickly become a serious competitor to Alipay in the market.

But with competitors like Google Pay and Paytm deepening their relationships with merchants, WhatsApp Pay could face an uphill battle in building its acceptance. Both Google Pay and Paytm have added tools for merchants to make it easier for them to accept digital payments and operate their businesses overall.

These offerings don't necessarily mean those merchants exclusively accept digital payments from the firm they receive payments solutions from, but they could help competitors fight off WhatsApp Pay by limiting its acceptance or appeal to merchants as it rolls out to more users. Because of this, WhatsApp Pay may need to provide merchants with its own payments solutions to grow its acceptance and convince consumers to use it to make purchases.

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