Paytm targets Facebook, Google on data localisation: No firm should be allowed to launch without local servers

In an indirect salvo at global giants who are eyeing Indian payment space, mobile payment major Paytm said that no payment firm should be allowed to launch services in India if it does not have local servers in the country.

"The payments network is interconnected and interoperable. Breach by any player who is not complying carries potential implications on all other players who have complied with the guidelines," Paytm COO Kiran Vasireddy was quoted as saying by ET report.

He further said that it is obligatory on part of all payment system operators and participants to ensure compliance with RBI's mandate at the earliest.

When data is processed and stored in multiple geographies, there could be a lack of clarity as to which country's data laws will be applicable to it. It will further help boost customers' confidence in moving towards digital payments, he added.

In April first week, the RBI had asked all payment players to ensure data related to payment system be stored inside the country within six months. The Apex bank in its regulatory policy observed that currently only certain payment system operators and their outsourcing partners store the payment system data either partly or completely in India.

Ensuring the safety and security of payment systems data by adoption of the best global standards and their continuous monitoring and surveillance is essential to reduce the risks from data breaches while maintaining a healthy pace of growth in digital payments, noted the regulator in a press statement.

The development came after many incidents of data breaches including Cambridge Analytica-Facebook leak incident, where 87 millions data of the social site users were reportedly breached and used to reach voters on social media with personalised messages during now US president Donald Trump’s campaign in the US.

Facebook has faced flaks from governments across the globe including India. Following the incident, the government had sent a show-cause notice to social giant asking whether the personal data of Indian voters and users has been compromised by Cambridge Analytica.

Global players rising interest in payment space

Of late, India payment space has seen interest from the global players. Besides incumbent Paytm, Google, Facebook (via WhatsApp), Amazon and Uber had thrown their bets on fast emerging UPI-enabled payment wave. All the global players are yet to have their servers located in India.

Facebook is currently staging beta test for its own payment product in India. Notably, the Mark Zuckerberg-led company’s payment product is an independent play and will compete with WhatsApp UPI.

Facebook has launched a beta version of messenger where select users can recharge mobile phones and other prepaid services including DTH and broadband amongst others. It will offer peer-to-peer and peer-to-merchant payments. WhatsApp UPI payment is also under beta testing and soon to be opened for its 250 million user base. It’s expected to disrupt the UPI-powered payment ecosystem when it would get open for all.

Whereas Google Tez, which recently launched its payment app, is integrating in-app chat feature, which will be available for its 13.5 million active user base soon in the country.

India’s digital payment space is expected to grow the segment by about five-fold to $1 trillion by 2023. It is currently estimated to be around less than $200 million, according to Credit Suisse report.

At present, there are multiple players such as Paytm, Itz Cash, Phonepay, CC Avenue and Citrus as well as global players including Uber, WhatsApp, Amazon, Facebook, and Google.
Facebook is also staging beta test for its own payment product in India.

VSS take on data localisation

This is not the first time Paytm has taken a stand on server localisation and payment system regulation.

Paytm CEO Vijay Shekhar Sharma earlier said that some regulations are required to strengthen privacy law and safeguard consumers’ data against leakage. He also emphasised that users crucial data including financial ones shouldn’t go outside of the country.

Some regulations are required to strengthen privacy law and safeguard consumers’ data against leakage, Sharma had said. He also emphasised that users crucial data including financial ones shouldn’t go outside of the country.

Sharma had criticised Facebook and WhatsApp for its alleged circumvention of regulations while launching UPI-enabled payment feature. He even termed the world’s largest social network ‘the evilest company in the world’.