The previous few years have been an interesting time for money and payments in India. On November 8th, 2016, the Government of India demonetized 500 and 1,000 rupee notes in a bid to crack down on the currency fraud and black markets. Demonetization has lead to a sharp rise in mobile payments at the end of 2016 in response to the removal of 86% of all paper currency. The removal of the notes has lead to a rise in digital payments in the past year, a market Credit Suisse Group AG estimates will be worth $1 trillion in the next five years.
Another major disruptive development is WhatsApp’s entry into the world of mobile payments. Already boasting 200 million Indians using its messaging service, WhatsApp is piloting a payment service that lets users transfer money to each other. The Facebook Inc. company joins Google and Alibaba-backed Paytm and dozens of other companies vying for mobile payment users as smartphone adoption grows.
What is WhatsApp Pay?
WhatsApp Pay, the name of the new service, has been received well in the country, with Saritha Rai and Anto Antony of Bloomberg Technology drawing comparisons to China’s WeChat Pay. Just as how WeChat Pay utilized its massive user-base to change the way payments are made in China, some are hoping WhatsApp might achieve the same in India.
WhatApp’s “base of 200 million, a daily active usage that’s about 20 times higher than Paytm’s and the fact that Indian users spend a lot more time on WhatsApp that even on parent Facebook has huge advantages,” says Satish Meena, an analyst for Forrester Inc.
While still in a test phase and available only to a select portion of users in India, WhatsApp Pay is compatible with the Unified Payments Interface, a digital payments system developed by the National Payments Corporation of India (NPCI) that facilitates real-time transactions. However, those in India left out by the pilot program do not have to wait long. A full rollout of WhatsApp Pay could come to all users as early as April, according to anonymous sources. Either way, a full rollout of the platform will include all features set out in the NPCI guidelines.
Because of its integration with India’s UPI, WhatsApp Pay differs from WeChat Pay and LINE Pay in that the platform does not utilize QR codes to transfer money, instead opting peer-to-peer messaging payment system, where the user taps a “payments” button on options to the person they are chatting to, before verifying purchases through a UPI account PIN.
What the Competition Thinks
Reception from rivals have widely ranged from optimism to outright hostility. Sameer Nigam, founder and CEO of PhonePe, a unit of the Flipkart Online Services Pvt., said that WhatsApp Pay had a major potential to create a “system shock” on a level comparable to the Government’s 2016 demonetization. In this case, Nigam believes the platform will help add the next 100 million mobile payment users.
On the other side of the coin, Vijar Shekhar Sharma has criticized WhatsApp Pay is bypassing security requirements and that Facebook is attempting to create a walled payments garden. Concern among the competition seems legitimate, as comparisons can be drawn with WeChat Pay’s role in AliPay’s drastic loss of market share.
India has seem a major upheaval in monetary terms, beginning with the removal of the 500 and 1,000 rupee notes. Whatever effects demonetization has had, it has created a unique opportunity for platforms such as WhatsApp Pay to further drive cashlessness in India. Buoyed by 200 million users, the platform has integrated with the country’s UPI, although it has come under fire from competitors for bypassing security regulations and trying to establish a monopoly. WhatsApp Pay is just another interesting development in Indian mobile payments.