Market Insight

Hike launches messaging payments in India ahead of WhatsApp

July 06, 2017  | Subscribers Only

Jun Wen Woo Jun Wen Woo Senior Research Analyst, Online Video

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Indian messaging app provider Hike launched Hike 5.0 in June 2017, claiming it to be the biggest update on the messaging platform that is compatible with Android 4.0 and above. New features include: 

• Personalised theme 

• Magic selfie  

• Timeline 

• Custom stickers 

• Hike Wallet 

• Blue packet – digital gift money 

At launch, Hike partnered with Yes Bank and joined the Indian government’s UPI (Unified Payments Interface) programme to allow users to make P2P and bank-to-bank transactions, as well as send Blue Packet (digital gift money) to other Hike users.

Our analysis:

Local knowledge gives Hike the advantage in India

IHS Markit estimates 4.5-year-old Hike reached around 70 million monthly active users in Q1 2017, up 30% YoY. Hike offers features including stories, timeline, hidden mode, artificial intelligence and payment services, which place Hike at a very competitive position in the Indian messaging market.

Given the size of the Indian market (with a population of 1 billion), there is still a lot of room for Hike to grow as no mobile social or messaging app in India currently has more than 10% penetration of population. This is much lower than messaging players in other Asian markets such as South Korea (in which KakaoTalk has around 80% penetration), China (where WeChat reaches around 50% of population) and Japan (where Line also has over 50% population penetration).

Hike remains focused only on its domestic market, which enables it to provide services that are focused on the low-data Indian market such as Hike Direct (communication on 2G connection), local keyboards and byte-size news. Adding payments to Hike’s messaging platform will help Hike to differentiate itself. 

However, Hike faces challenges such as low internet connectivity and smartphone adoption, as well as competition from WhatsApp and Facebook Messenger.  WhatsApp reported that it reached well over 200 million active users in India early 2017. So far, WhatsApp remains a lean communication app which enables users to message and call their contacts. But in April 2017, Facebook was reported planning to develop a digital payment service for WhatsApp in India later this year leading to an increased competition in the market.

Can Hike recreate WeChat’s success?

Hike received USD 175 million funding from Tencent in August 2016, and its Blue Packet feature is also inspired by WeChat’s Red Envelope in China: both services allow users to send digital gift money for special occasions. Hike will hope to reach similar success as Tencent’s WeChat, who reported more than 600m active payments users by the end of 2016, thanks to its Red Envelope and other social media and payments features.

Although the Indian government’s demonetisation policy has created a favourable landscape for mobile money services, Hike is facing strong competition from other mobile payments services in India, such as Paytm and MobiKwik. Paytm, the online shopping platform backed by Alibaba and Softbank, in particular boasts high levels of funding, as well as a strong user base. It received USD 200 million from Alibaba in March 2017 and a USD 1.4 billion investment from Softbank in May 2017; its user base for the mobile wallet feature reached 225 million Q2 2017.  The funding and strong user base have provided Paytm advantages to further expand its mobile payments offerings.  MobiKwik is a fast growing payments start-up; it reached 50 million users in May 2017 and secured USD 90 million funding in 2016.

In order to compete with these mobile money services, developing similar features is not enough for Hike to recreate WeChat’s success; the key to standing out is integrating its messaging payments service with a wider mobile commerce ecosystem. Launching P2P and bank-to-bank transactions is only the initial step to increase the engagement between users and the service. Hike should consider taking advantage of the payments details and the money that users keep in their Hike account to monetise. For instance, collaborating with financial institutions, thereby developing Hike Wallet as the gateway to more mobile financial services such as insurance, loans and micro investments.

WeChat’s success also relies on its innovation and strong partnerships with merchants. Hence, expanding partnerships is crucial for Hike to compete with major mobile money services in India. Apart from P2P and bank-to-bank transactions, users are only able to use Hike to pay for their phone bills at present, whilst Paytm allows users to make in-store and online purchases through their smartphones. To further monetise and tie users to its platform, Hike has to develop beyond messaging payments service to become a holistic m-commerce platform covering finance, advertising, customer services, shopping, entertainment, as well as public services. 

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