Nikita Vashisht | Neha Alawadhi
Moneycontrol News
The Reserve Bank of India’s (RBI) hand is being seen behind the Centre pulling up Google on the apex bank's recent directive to shift user data of its digital payments platform, Google Pay, on local servers.
Sources told Moneycontrol that the banking regulator felt the technology giant could “use the information to its advantage” and has approached the Ministry of Electronics and Information Technology (MeitY) to push the company to fall in line.
Google Pay is an app built on the unified payments interface or UPI, a system that allows account holders of all banks to send or receive money from their smartphones without the need to enter their net-banking user ID or password.
Last Sunday, a letter written by Google chief executive officer Sundar Pichai surfaced in the media in which he called for “free flow of data across borders”.
“Free flow of data across borders -- with a focus on user privacy and security -- will encourage startups to innovate and expand globally and encourage global companies to contribute to India's digital economy,” Pichai said in the letter written to union minister for Information Technology Ravi Shankar Prasad. Prasad had visited Google headquarters in Mountain View California last month.
Pichai further added that Google will remain “committed” to India’s growth story and supported the “vision of digital India”.
Sources, however, told Moneycontrol that the letter's appearance in public will pressurise the tech giant to comply with the RBI's directive to store payments data in local servers by mid-October.
It was learnt that the central bank had prepared and submitted a note to the IT ministry about two months back stating “why they think Google either has or has the scope to use the user data to its own advantage” which the Bank feels is “unfair”.
“RBI feels that they (Google) should have done it already but as it was not done, the letter was leaked,” sources added.
A day after the letter surfaced, a government official was quoted as saying that Google had agreed to comply with the RBI directive but had sought time till December.
Google did not respond to an email request for comment asking whether the RBI has tried to engage with it on the matter or if the Ministry of IT has engaged with it for the regulator’s directive on data localisation.
The RBI did not respond to Moneycontrol's email seeking comments for this story.
In April’s bi-monthly monetary policy, RBI had asked all payment system operators to ensure that “data related to payment systems operated by them are stored only inside the country within a period of six months” in a bid to have “unfettered access” to all payment data for “supervisory purposes”. The deadline for this ends on October 15.
According to sources, the banking regulator will decide on extension of the deadline only after October.
The directive has received mixed response from payment operators across globe. While home-grown firms like Paytm and Flipkart-owned PhonePe have supported the move, international firms like Visa and MasterCard have expressed their reservations against it.
According to a Reuters’ report, US trade groups representing companies such as Amazon, American Express and Microsoft have voiced their opinion against local data storage saying that “India’s data on-shoring move could cost millions of dollars and set a precedent for other major governments to implement similar rules”.
Global industry associations and companies argue that data localisation, or setting up local servers in India, would be bad for the data economy, a sentiment also echoed by Pichai in his letter.
As of August 28, Google claimed the app had 22 million people and businesses using Pay every month, who it claimed made over 750 million transactions that were worth over $30 billion or about Rs two lakh crore.
According to this report in The Economic Times in July, Google Pay accounted for about 22 percent of the total volume on UPI.
Also read: Payments firms seek extension of RBI's October deadline for data localisation
Clearly, Google has high stakes in the digital payments business in India, and now with Facebook-owned WhatsApp readying to enter the market, the war of digital payments can only get fiercer.
The financial data aggregator, in any country, effectively has to be the central bank, a source with knowledge of the conversations between RBI and MeitY told Moneycontrol.
“RBI is the data aggregator as far as the financial transactions are concerned and they don’t want the RBI data to become a Google data,” the person added.
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