What Is GDPR Compliance and How DPDP Affects Your Payment Gateway

Highlights:

• Understand GDPR and DPDP Act requirements for protecting customer payment data stored by your payment gateway
• Learn RBI's data localisation mandate and card storage restrictions that apply to all Indian merchants
• Discover penalty structures, GDPR fines reach 4% of revenue, DPDP imposes fixed ₹250 crore caps
• Follow actionable compliance steps, including PCI DSS verification, tokenisation checks, and breach notification procedures

Introduction

Every online transaction leaves behind more than just a payment confirmation. It creates a trail of personal data: names, phone numbers, email addresses, billing addresses, IP details, and sometimes even behavioural data. For businesses using a payment gateway (PG), protecting this customer data is no longer just a security best practice. It is a legal obligation.

If your payment gateway stores or processes customer information, your business may need to comply with both the European Union’s General Data Protection Regulation (GDPR) and India’s Digital Personal Data Protection (DPDP) framework. Even if your company is based in India, GDPR may apply if you handle data from EU customers.

Understanding these regulations is essential. Compliance reduces legal risk, strengthens customer trust, and demonstrates responsible data governance.

What is GDPR?

The General Data Protection Regulation, or GDPR, is a European Union (EU) law that governs how organisations within and outside the EU handle the personal data of EU residents. GDPR was adopted by the European Parliament and Council of the EU in 2016 and took effect on 25 May 2018.

Specifically, GDPR

• defines legally approved ways to transfer and process personal data;
• details how organisations must protect personal data at rest and in transit; and
• establishes EU residents' rights over personal data collection, use and possession.

GDPR defines personal data as any information relating to an identifiable human being, including direct and indirect identifiers. Direct identifiers are a person's unique data points, like their name or credit card number. Indirect identifiers include non-unique traits that can still identify a person, like physical characteristics and dates of birth.  

In GDPR parlance, a data subject is the person a piece of data is about. For example, if a company collects email addresses, the owners of those addresses would be the data subjects. 

While GDPR is a European law, it has a global reach. It applies to any organisation anywhere that collects or uses the personal data of EU residents.

What is DPDP?

DPDP stands for Digital Personal Data Protection.

It refers to India’s Digital Personal Data Protection Act, 2023 (DPDP Act), which is India’s main law for regulating how organisations collect, use, store, and protect personal data in digital form.

The law was introduced to give individuals more control over their personal data and to make businesses more accountable for handling that data responsibly.

In simple terms, what is DPDP?

DPDP sets rules for how companies, websites, apps, and service providers can collect and process personal information, such as:

• Name
• Phone number
• Email address
• Address
• Payment details
• IP address
• Any other information that can identify a person

If a business collects this type of data digitally, it may need to comply with the DPDP Act.

Why Payment Gateways Need Special Attention

Payment gateways require special attention under GDPR and India's DPDP Act 2023 because they process massive volumes of highly sensitive financial and personal data, making them prime targets for cyberattacks. Both frameworks prioritise explicit consent and strict data handling, with India’s DPDP creating a "processing-centric" regime that holds fintechs strictly accountable, while GDPR imposes heavy global turnover penalties.

Key Reasons for Special Attention:

• High-Risk Data Handling: Payment gateways manage personal data, financial information, and transaction history, which must be protected through strict security measures, data minimisation, and privacy-by-design principles, as reflected in the security and compliance practices of PhonePe.
• Stringent Consent Mechanisms: Unlike GDPR, which allows for various legal bases, the DPDP Act makes informed, specific consent the primary requirement, demanding complex, per-transaction consent for swift digital payments.
• Data Localisation (DPDP): Indian regulations require end-to-end transaction data to be stored within India, demanding strict control over data flows.
• Severe Penalties: DPDP penalties can reach ₹250 crores (~₹30 million) for breaches, while GDPR allows fines up to 4% of annual global turnover.
• Interplay of Multiple Regulations: Payment gateways must navigate DPDP simultaneously with existing RBI regulations on cybersecurity and data storage.

Differences in Compliance Focus (GDPR vs DPDP):

• Consent: While both regulations focus on consent, the DPDP Act (2023) prioritises consent as the primary mechanism, making it more challenging to rely on "legitimate interest".
• Definitions: DPDP often has a broader definition of personal data, including pseudonymized data.
• Data Principal Rights: Both regulations empower users to access, erase, and correct their data, with DPDP requiring rapid response mechanisms from data fiduciaries.

Practical Steps to Ensure GDPR and DPDP Compliance

Ensuring compliance with GDPR and India's DPDPA involves auditing data, mapping flows, updating consent mechanisms, and implementing security measures like encryption. Key steps include appointing a Data Protection Officer (DPO), managing subject rights requests, and ensuring third-party contracts are updated to meet legal requirements.

Practical Steps for Compliance (2026 Focus)

• Data Discovery and Mapping: Conduct audits to classify personal data, identifying where it is collected, stored, and shared.
• Implement Data Subject Rights Procedures: Establish systems to handle requests for access, correction, or deletion (erasure) within mandatory deadlines.
• Revamp Consent Mechanisms: Ensure consent is freely given, specific, informed, and easy to withdraw (opt-in/opt-out).
• Appoint a Data Protection Officer (DPO): Designate a DPO to oversee compliance, especially for significant data fiduciaries under DPDPA.
• Strengthen Cybersecurity Measures: Utilise encryption and pseudonymization for data at rest and in transit.
• Update Third-Party Vendor Contracts: Ensure data processing agreements (DPAs) are in place, particularly for cross-border transfers.
• Data Retention and Deletion Policies: Define retention periods and set up automated deletion for data that is no longer necessary.
• Employee Training: Build a privacy-first culture by training staff on data protection obligations.

Key Compliance Differences: GDPR vs DPDP for Payment Data

Key Takeaways for Compliance-Focused Merchants

Payment gateway compliance isn't a one-time checklist; it's an ongoing obligation requiring vigilance as regulatory frameworks evolve. With DPDP core requirements effective May2027, Indian merchants have less than one year to implement consent mechanisms, breach notification protocols, and data security safeguards. Verify your payment gateway's RBI datalocalisationcompliance, PCI DSS certification, and tokenisation implementation now before regulatory deadlines arrive.