WhatsApp digital payment service launched!

Last week Wednesday, WhatsApp, the world’s most popular messaging app, with over 1.2 billion users worldwide and 200 million in India alone, launched its digital payment service, with India being the first country to taste this. WhatsApp cost Facebook $ 22 billion to acquire, but the company before now had not figured out a way to bring in cash to its parent. Thus, the launched payment service should delight Facebook. In India, according to the original plan, the payment platform will be geared toward small businesses employing less than 10 people.

India is a perfect target for the new platform: The country has the most users of WhatsApp in the world. In fact, WhatsApp is more popular than Facebook in India because of a few reasons that include poor bandwidth; meaning that the payment system in Facebook’s Messenger app is not accessible to the average Indian. Although China has the largest population of Internet users at a reported 750 million, the country does not have a free-market economy. India does have some level of protectionism as well, but it appears the country is more receptive to companies from outside.

Another factor favoring India is the fact that the country is at present reportedly experiencing a boom in mobile payment; subsequent to its government’s announcement in 2016 of plans to remove large-denomination bank notes as a way to help crack down on tax evasion and counterfeits. The attendant shortage in notes seems to be driving the increased interest in mobile payment apps. There are reports that people are already using WhatsApp in India to sell goods, in an e-commerce portal mode, even though the app does not offer features that specifically support the practice.

As mentioned in the 10 April 2017 article in this column, digital payment services are nothing new in India, thereby paving the way for WhatsApp. This also means that WhatsApp has to compete with the incumbents. The Reserve Bank of India reported that in January of 2016, India recorded more than 262 million transactions worth over $1.3 billion in digital payment services, compared to 100 million transactions in October of 2015. The government of India has launched the Unified Payments Interface (UPI), which allows banks and mobile apps to easily exchange currency.

Obviously, mobile financial transaction solutions have a special meaning for unbanked or under-banked communities in rural areas of developing countries such as Nigeria or India; providing impetus for technology. As a result, associated projects have attracted public and private funding from organizations such as the Bill and Melinda Gates Foundation and USAID.

If you are on a supported network, you’ll see a Payments window under Setting in WhatsApp, through which you can navigate to select a bank from a long list. WhatsApp has partnered with ICICI Bank in India to process UPI payments across the platform. Both Android and iOS are reportedly supported.

With whom isWhatsApp going to lock horns in India digital payment service business? There are quite a few. A potential competitor for WhatsApp is Truecaller, an app out of Sweden that was developed to remove spam calls coming into your phone. Truecaller announced its intention, at the end of March 2017, to roll out a payments service in India, and plugging into the UPI platform by partnering with a local Indian bank (ICICI Bank).

M-Pesa might as well be the one for WhatsApp to beat in India. It is a mobile phone-based money transfer, financing and microfinancing service out of Kenya that was launched in 2007 by Vodafone for Safaricom and Vodacom, the largest mobile network operators in Kenya and Tanzania. M-Pesa is now being used throughout the developing world - Afghanistan, Kenya, India, South Africa, and Tanzania.

M-Pesa found its way into the Indian market in 2008, where it is locally referred to as M-Paisa, (the paisa is a subunit of the Indian rupee). The success of Kenya’s M-Pesa has reportedly generated a competitive environment, to the tune of almost 200 similar products! Vodafone M-Pesa was reportedly launched in India in 2013 and has brought financial and digital inclusion to more than 8.4 million Indians. As of the middle of last year, the service boasted of around 130,000 outlets across India, both in major towns and increasingly in rural areas. As a retailer or merchant in India, you simply need to download the Vodafone M-Pesa app, register for Vodafone M-Pesa Pay as a merchant, and your customers can use their (M-Pesa) wallet, bank account or debit/credit cards, in a completely seamless manner.

Paytm, an indigenous mobile payment platform in India, has also gained ground; receiving approximately $2 billion in financing from Alibaba and SoftBank. Paytm handles payments made by credit and debit cards, among other capabilities.

Thus, as it were, WhatsApp will not be “discovering” India with its new deployment. It is conceivable that a country like Nigeria, which has some similarities with India, could be targeted for WhatsApp’s payment system. However, the local banks in that country seem to be highly placed technologically to offer effective resistance.