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Vijay Shekhar Sharma Rightly Worried: WhatsApp Payment Means Survival of the Fittest

Feb 21, 2018 1:23 PM 5 min read

With the Indian payments ecosystem already unnerved by a volatile regulatory regime and incessant government meddling, all hell broke loose when WhatsApp released its Beta payments feature in its highly popular messaging app last week.


Home-bred, but Chinese-backed Paytm took the lead with founder Vijay Shekhar Sharma accusing the Facebook-backed incumbent of “killing beautiful open UPI system with its custom close garden implementation.” Interestingly, WhatsApp has managed this break-through only after a failed effort last year wherein its attempt to enter the digital payments space in India in partnership with a private bank was pulled up by the Reserve Bank of India (RBI).


The narrative however took an interesting turn in the aftermath of demonetization when the government pro-actively sought to promote the Unified Payments Interface (UPI) in a push to digitize the economy under the Digital India program.


UPI is a real-time payment system developed by National Payments Corporation of India (NPCI), launched in August 2016, facilitating instant inter-bank fund transfers on a mobile platform. The system currently hosts around 71 banks, expediting over 152 million transactions in January. With big names like Google Tez and Paytm jumping onto the bandwagon, the digital playground of payments has expanded exponentially in the past couple of months. Now with the ingress of WhatsApp along with its colossal user interface of more than 250 million in India, the payments arena is set for another disruption.


According to media reports, WhatsApp’s payment interface has been rolled out in a phased manner, in order to enable both the application and the banks to gauge the extent of use and potential traffic. While it currently has a tie-up with ICICI bank, the payment gateway seeks to expand its partnership to SBI, Axis, HDFC too. This is in itself suggestive of the magnitude of the project.  


A prominent contention against the feature is that it doesn’t require a login session, unlike other platforms like Paytm or Tez. This poses a threat to the user’s sensitive data.  NPCI has been accused of being biased to the global player in granting it exemptions which were not allowed to its counterparts. NPCI, however, was quick to respond to these allegations asserting that the application will be permitted full scale public launch only when it fulfils the guidelines laid down by the authority, i.e., incorporate wallet interoperability, generate BharatQR codes and have both intent and collect payment options.

Hike Messenger

Integration of a payment ecosystem with a messaging application is exemplary of the changing frontiers of India’s financial architecture. A single platform catering to multiple user demands only enhances the user experience. For instance, Paytm, which started off as an e-payments platform has in less than a year expanded its services to being an e-commerce website, a bank and a lending platform. Such integration promises a wider customer-base – evident from WePay’s success in China.


Alipay had dominated the Chinese payment market for years until the launch of WePay, the payments arm of WeChat. WeChat was initially launched as a messaging app ‘Weixin’ in China in January 2011. Over the last 7 odd years, it has become the one-stop solution for its customer needs – integrating a widely-used messaging application with the most commonly used applications and services such as booking tickets, online shopping, paying for groceries – basically all services a user would want in a day.


In addition to this, introduction of the payments feature in an otherwise free application, will enable WhatsApp to effectively monetize its existing business model, increase customer retention and develop a sustainable revenue model.


Is then the launch of a beta version a warning knell for other players in the industry like Paytm, MobiKwik, Tez, Hike? Will this bring about an overhaul in India’s payments ecosystem, engulfing smaller, in particular domestic players?


India currently has a considerable number of local players in the digital payments arena such as Paytm, Hike, Freecharge and PayUMoney. Additionally, some banks have launched their own payment apps such as Ping Pay (Axis Bank), Buddy (State Bank of India) and PayZapp (HDFC Bank). It is amidst this chaos that the Indian government announced the launch of its home-grown app BHIM. Another blow was the launch of Google’s payment’s app Tez.


With little headroom, the digital payment space is a tremendously competitive one and it is only justified if the smaller players feel threatened with the influx of global players like WhatsApp and Tez. Even BHIM, which was launched by the Prime Minister saw a sizeable dip in volume post the arrival of Tez. According to media reports, BHIM’s share crashed to 6% in December 2017, from a 40% share in terms of volumes during January-August 2017.


However, it needs to be duly noted that while WhatsApp is restricted to peer-2-peer transactions as yet, others like Paytm, MobiKwik and Google Tez already have merchants on their platforms. Thus, while WhatsApp can leverage upon its existing customer-base, other players have the benefit of a head start. It then remains to be seen what course the industry intents to take. As is well known, most new industries, often fragmented, progress through a consolidation phase – a consolidation, much akin to the one witnessed in the ride-hailing industry in India, wherein Uber and Ola, the prominent players subsumed the smaller ones like Meru, Mega Cabs etc.


The government on its end can either follow a protectionist regime like China, safeguarding its payments architecture and restricting the players to the local ones like Alipay, WeChat etc. or lay down a regulatory framework which would ensure that there is a level-playing field available to all contenders. It must simultaneously ensure that the customer’s data is secure and protected from any cyber threat in this increasing evolving digital arena.