In Momentum Works’ 2019 predictions for India made in December 2018, we predicted that “WhatsApp payment fails to take off”. It turned out to be true – despite multiple pledges by Facebook executives that it would launch “soon”, the necessary regulatory approval did not come by end of 2019.
We did not make the same prediction for 2020, because we felt that there should be some breakthroughs.
In February this year, the National Payment Corporation of India (NPCI), a subsidiary of the Reserve Bank of India (RBI), issued a letter of no objection, allowing WhatsApp Pay to be extended from 1 million trial users to 10 million first phase users.
In 2020, after a number of events including the pandemic and the banning of Chinese apps, NPCI has finally allowed WhatsApp Pay to roll out. WhatsApp confirmed that on its Twitter account, promising a simple and smooth experience.
Two years of waiting
WhatsApp has nearly 400 million users in India – their largest market in the world. India has naturally become the top priority of WhatsApp’s global mobile payment rollout. As early as February 2018, WhatsApp began to test payment functions at a small scale in India, but due to regulatory approval issues, full rollout took a while to realise. Even after NPCI approved WhatsApp to expand its test earlier this year, restrictions on the scale of its promotion have prevented WhatsApp from flexing its full muscle.
As a result, WhatsApp finally chose Brazil (WhatsApp’s second-largest market in the world) as its starting place for mobile payments. Ironically, Brazil’s central bank called it off within a week after launching.
Why now
The pandemic accelerated digital developments in a number of countries, and India is no exception. According to data from Unicommerce, a subsidiary of Snapdeal, e-commerce orders in the third quarter of 2020 increased by 31% compared with the same period last year. In the first month, if you believe in those data, ecommerce as a percentage of total retail in India reached 4.5% – record-breaking indeed.
As major social players globally (including Facebook, YouTube and TikTok) move aggressively into ecommerce, the fight over payment control is inevitable.
The ban on 59 Chinese apps in June this year caused considerable controversy. Many Indian companies with Chinese investors (that include half of the unicorns) have been impacted in one way or another.
It is hard to believe that the WhatsApp Pay approval has nothing to do with Facebook’s US$5.7 billion investment in Mukesh Ambani’s Reliance Jio, announced earlier this year.
What is the outlook?
After obtaining the mobile payment business license, its mobile payment function will use NPCI’s Unified Payment Interface (UPI) – a centralised settlement system for digital payments. It will also work with ICICI Bank, HDFC Bank, Axis Bank, National Bank of India and Jio Payments Bank.
Unshackled from previous restrictions, WhatsApp Pay now is free to compete with Alibaba-backed Paytm and Flipkart’s Phonepe.
At the same time, as part of (or as a result of) the US$5.7 billion investment, WhatsApp Pay is also expected to be integrated with various services under Jio, including instant messaging software Jio Chat, TV application Jio TV, cloud service Jio Cloud, payment application Jio Money, and ecommerce platform Jio Mart, etc.
India’s UPI mobile payment transaction volume exceeded 2 billion in October, of which PhonePe created 835 million and ranked first, Google Pay ranked second with 820 million, Paytm and Amazon created 245 million and 125 million respectively.
As the pandemic is yet not under control, digital payment will still have a few months to further grow and solidify user habit (and usage).
However, it is worth noting that the room for payment platforms that do not have their own use cases such as Paytm has shrunk under the development of NPI. Whether the situation can be reversed depends largely on whether players can quickly expand a virtual credit card/playlater offering (similar to Ant Financial’s Huabei) or other services that are more sticky from a users’ point of view.
Indian regulators are quite smart, and reasonably cautious. WhatsApp and other payment platforms will face the relevant regulations that the total UPI transaction volume processed by anyone platform shall not exceed 30%.
That makes sure no platform will dominate, and a healthy competition is always in place, settled by infrastructure owned by the state.
With its 400 million users in India, WhatsApp still has a lot of room to play for its payment services.
In comparison, Bezos might not be in a position as comfortable as that of Zuckerberg, at least for now.