All About WhatsApp Pay
“Now you can send money just as easily as sending a message”, is what Mark Zuckerberg said to describe WhatsApp Pay.
Agreed, but truth be told, this ease isn’t a watershed development in the digital payments space, for this is the central feature that unites ALL UPI services.
WhatsApp Pay is now live! You open the app, click on ‘attachments’, select ‘payments’, enter the amount to be transferred, authenticate using the UPI pin and you’re done!
Just remember to ‘update’ the app, while we update you on the business-end of this enterprise.
Makings of WhatsApp Pay
Facebook-owned WhatsApp has been trying to jump on the digital payments services bandwagon and launch person-to-person payment services for a while, finally making headway in Brazil in June 2020.
In India, WhatsApp had started its payments services on a trial basis (1 million users) back in 2018. Two years and a lot of regulatory scrutiny later (we’ll get to that in a bit), the National Payments Corporation of India (NPCI) gave its green light for the company to launch the UPI-powered payment services.
The launch, albeit, is occurring in a phased manner. Currently Whatsapp is permitted to roll out the service to only 20 million users in collaboration with five banks (ICICI, Axis, HDFC, SBI and Jio Payments Bank).
(Consequence: This has necessitated an unusual first-come-first-serve policy for the app.)
Incidentally, NPCI’s other announcement on enforcing a 30% transaction limit on third-party apps comes conveniently to create a “level-play” in the UPI field for WhatsApp Pay. But, it may impact the growth of other UPI-players (which excludes Paytm due to its payment-wallet model).
What Are the Prospects We Are Looking At?
In April 2020, Facebook and Reliance Jio came together in a $5.2bn deal giving the former a 10% stake in Jio Platforms (the digital services subsidiary of RIL). This alliance was believed to be very ergonomic because a partnership between two tech honchos could set trails ablaze.
Two things you should remember.
Facebook Inc owns WhatsApp (since 2014) and many other allied platforms (Instagram, Messenger, Oculus etc) which makes it a behemoth social media directory and data disseminator.
JioMart, on the other hand, is an e-commerce platform (launched in January 2020) that started with its hyperlocal objective of facilitating the online grocery delivery services.
Combining their strengths means using WhatsApp Pay’s payment channel (with over 400 million subscribers in the country) to enable purchase from a seamless online marketplace (accessible to over 388 million Jio users).
It is a prospect that seems ambitious for the online retail sector, and daunting for the existing players like Amazon, BigBasket and Grofers. Even Zomato, Swiggy, Uber who had capitalised on the demand for essential services delivery during the lockdown.
What Shall We See On the Other Side?
The usual on the menu: data security, antitrust alarms, institutional liability.
‘Social engineering attacks’ are on the rise and with a large user base, WhatsApp will find it difficult to secure against them. Putting a cap on peer-to-peer transfers could help on an immediate basis until all other firewalls are tightened to increase scrutiny in the system.
The KYC-feature on the app is still unclear. A robust due-diligence machinery is the precursor to building a payment network.
A strong network may be good for business but creates problems for digital platform economies. The combination of both the apps’ data (creating a new entity) will perhaps create an entry hurdle for similar partnerships between other rivals.
Again, the sheer amount of user data that WhatsApp has is likely to prevent other competitors from gaining critical mass to stay viable. Data leveraging is a serious antitrust issue and can lead to foreclosure of markets.
Finally, the “intermediary” debate rears its head in situations like this where third-party payment apps might not wish to bear responsibility for fraudulent attacks against customers. RBI insists on not letting that happen, but you know, promises promises!
The index of familiarity plays to WhatsApp’s advantage. People who look up to forwards all day but have been at two minds about joining payment services are likely to avail the new feature offered by their friendly neighbourhood WhatsApp. It is as easy as sending a message, after all!
(Originally published November 9th 2020 in transfin.in)
