WhatsApp is now approved by the National Payments Corporation of India (NPCI) to launch payment services in February 2020, around two years after the beta launch of the service. The official launch of the service was delayed due to regulatory challenges including data localisation rules and privacy concerns of the Indian government.
WhatsApp Payments Unified Payments Interface (UPI) based payment service will be made available to WhatsApp users in a staged deployment across its’ large Indian user base.
WhatsApp Pay launch to strengthen Facebook ecosystem in digital payment space
WhatsApp reached 2 billion monthly active users in February 2020. Being the largest market for WhatsApp, IHS Markit technology estimates the messaging app had over 400 million monthly active users in India by the end of 2019.
According to the Reserve Bank of India, digital payment use increased from 2.4 digital transactions per capita per annum in March 2014 to 22.4 in March 2019. Facebook sees a significant growth opportunity in India given its vast population – the second largest country in the world after China. Unlike China there is less protection for what have rapidly become the Chinese digital payments incumbents, WeChat Pay and Alipay – whose backers have promoted similar services in India. Mobile payments have also been boosted by two Indian Government initiatives. The first was the introduction of the Unified Payments Interface (UPI) which launched in April 2016 to facilitate inter-bank transactions. That was then boosted by demonetization in November 2016, when many banknotes were cancelled, leading to a cash shortage.
The mobile payment service will add value to Facebook’s current offerings, bring new opportunities for service expansion – for example by facilitating e-commerce - and drive overall revenue growth. The peer-to-peer payments (P2P) feature will be important to WhatsApp because it can be integrated with the messaging platform and allow for seamless transactions between users and may prove a long missing path towards monetization of the platform. The feature will also add value to ‘WhatsApp for Business’ accounts by facilitating transactions within the platform.
WhatsApp large userbase may position its payment service to succeed, but challenges remain
However, WhatsApp Pay will face challenges from existing players in the market. Paytm, a local e-commerce and digital payment platform that is backed by Alibaba’s 2014 spin-out, Ant Financial (formerly AliPay). Paytm claimed to have 150 million annual transacting users in Feb 2020, offers its service in 11 local languages and has extensive partnerships with merchants and local businesses. Other messaging platforms that already support payment in the market includes Google Pay and Tencent-backed Hike. Flipkart, a local e-commerce platform (owned by Walmart since 2018) also operates a popular payment service, Phonepe.
In December 2019 PhonePe reported linking over 8 million merchants, 150 million bank accounts and 56 million debit or credit cards, making an additional 4 billion transactions since passing the 1 billion mark in November 2018. Reflecting the success of the super-app strategy in China, PhonePe is aggregating a range of food, grocery, shopping and travel services within its payment app under the Switch program, while also linking to local stores.
That may indicate the path to success for WhatsApp Pay. To succeed, partnerships leveraging a range of services will need to be combined with local knowledge and localization efforts. Combined with the scale of the WhatsApp network and the and international capabilities of Facebook, the outlook for success is positive.