How Meta’s global team derailed WhatsApp India's payment ambitions

Ahead of the launch, top National Payments Corporation of India (NPCI) executives and a few bankers were discussing how to manage the anticipated sudden bump in payments seamlessly without incidents. While initially, everyone feared that WhatsApp would take over the market in no time, it was not to be. In fact, it was one of the major reasons that prompted NPCI to come up with the 30 percent market cap for third-party UPI apps.

Considering that three UPI apps had cornered close to 95 percent of the UPI market share, NPCI was hoping that WhatsApp could dent the leadership enjoyed by the existing players. A lot of people in the ecosystem wanted WhatsApp to succeed. But by the end of 2022, NPCI top brass was disappointed that it is not going to happen in the near future.

WhatsApp was also probably hurt by a staggered launch given to it by NPCI, fearing domination by the chat app. It started with a trial among a small group of users. Then, it was allowed to open up the payments platform to 20 million users and then 40 million and 80 million users, and so on. This probably prevented WhatsApp from going aggressively into the market and announcing its entry into payments as it could not have onboarded everyone even if it wanted to. By April 2022, it could onboard 100 million users, but the momentum was lost.

"The company was late to the UPI party. To dislodge the entrenched existing players, the company had to do aggressive marketing and ought to give cashbacks. Instead, the Meta top brass were overconfident that the 500 million daily users will automatically start using the app for payments as happened for WeChat in China. But there is a big difference between chatting and paying, at least in India," says a fintech consultant, who has worked with banks and startups.

And that is just the tip of the iceberg when it came to the multitude of challenges it faced in the country to get going.

Moneycontrol sent detailed questions to WhatsApp on its approach and strategy on payments as well as the role of Meta's global headquarters in India. The company declined to comment on the story and did not verify the specific details mentioned in the story. Abhijit Bose did not respond to Moneycontrol's messages on the story. Manesh Mahatme and Vinay Choletti could not be reached for comments on the story.

Hobbled by Meta

The dual structure of who runs and owns WhatsApp Pay was a big issue. Some decisions were taken by Meta while a few were taken by WhatsApp Pay India officials. "It was never clear who you were dealing with. Sometimes the Meta policy or marketing division, which had no idea how or what to do for WhatsApp Pay, held key discussions with partners and officials," says a person who had worked with WhatsApp Pay.

Meta was not ready to budge on any of the local requirements that were required for running WhatsApp Pay smoothly in the country. For instance, to run UPI operations in India, a domestic bank account is essential. Meta had global banking relations and the treasury department in the US for a long time and did not let WhatsApp Pay in India to work with Indian banks.

Even after the launch, when WhatsApp Pay wanted specific payments-related user experience and interface changes specific to India, the local team had to get approval from Meta in the US. "All the key decisions had to go through Meta's top executives at Menlo Park. Even the approvals do not come fast, forget the execution," says a senior executive who had a ringside view of the matters at WhatsApp and Meta.

For peer-to-peer or interpersonal money transfers as well as businesses working on WhatsApp for communication with customers, WhatsApp payments can be faster with a fully native experience — or customers don't have to go to any third-party apps — and even the architecture was built to be faster.

"For anything to be successful in India, you need to have awareness, high visibility and constant nudges for behavioural changes. You don't see payments anywhere on the home screen. Scanning the QR code — the most popular mode of payments these days – is two steps behind," says a senior fintech executive who is aware of what happened at WhatsApp.

Elephant in the room

However, what mattered most was WhatsApp's unwillingness to entice customers with cashbacks. India is known as a tough market with a lot of local competitors even for the likes of innovative companies like Uber and Amazon. Google Pay, PhonePe, Paytm, and Amazon Pay UPI had made their mark in the ecosystem with continuous cashbacks.

“India is not a free market. You need to invest in payment discoverability on the app. Then you need to make people aware that WhatsApp now has payments. Finally, you need to incentivise them with cashbacks to change an existing payment behaviour. And they were ambivalent or unhelpful on all of these counts and failed the India team," says the senior fintech executive quoted above.

According to a couple of sources aware of the matter, the India team had requested the Meta HQ for a marketing budget to the tune of $50 million, including for cashbacks and promotional activities. In 2021, the Meta global team did allocate $50 million for the India team, but they spearheaded the marketing expenditure around other issues instead of payments. "The whole Meta India team was disappointed as they were all excited about the scope of payments in India," says the fintech executive quoted above.

Matthew Idema, the then chief operating officer at WhatsApp, had helped the India team by expediting the building of the payment features required in the app. Meta India head Ajit Mohan, Bose ,and Mahatme convinced Idema to give the India team considerable freedom to run operations in India and it worked briefly in late 2020 and 2021. Idema also helped WhatsApp in building some partnerships as well as gave some freedom to pursue local business goals. However, Idema was moved to the Business Messaging division of Meta in late 2021, which once again crippled the India team.

"When Matthew was around, the India team could represent the company in talks with NPCI and banks. Once he moved out, every single decision regarding local operations had to get HQ approval," the second executive quoted above said.

In contrast to WhatsApp's experience, Walmart-owned PhonePe and Google's India team had a big role in ensuring that they had all the resources for the India payments division to succeed. Walmart, as a parent entity, is letting its subsidiary PhonePe raise a billion dollars independently. Similarly, when Caesar Sengupta was leading the Next Billion initiative for Google, the company invested a lot in Google Pay, then called Tez. Alphabet CEO Sundar Pichai is also a believer in UPI technology, having requested the Federal Reserve to bring a similar payment system in the US for instant payments.

"During much of 2021 and 2022, Meta was obsessed with challenging TikTok through Instagram Reels as well as building Metaverse products and features; any other demands from other regional teams were ignored," the second person adds.

Can do, but will it?

However, blaming it all on Meta's decision-making or policies cannot explain the fact that even other players have not managed to dislodge the PhonePe-Google Pay duopoly in the UPI market. The two players together have had an 80 percent market share for more than three years now. Paytm, Amazon Pay, Bhim, and Cred have not seen as much success in taking market share from them.

A senior fintech executive associated with WhatsApp says that the company can still take serious market share if it starts a consistent marketing campaign along with the rollout of cashbacks to win the market. An average person spends 45 minutes on the app and sends 50 messages per day. That is the kind of frequency no payment app can compete against.

"The opportunity is huge and is still for the app to lose," the second person mentioned above says. Payments is often considered a habit and this second person reckons that a user has to be on the app at least 15 times consecutively or for a continuous period of three months to form that habit. "The promotional activities had to run that long to keep the users' attention. They need to think of WhatsApp when they think of payments rather than just for chatting," the person adds.

WhatsApp today has more than 25 million businesses using the platform to engage with customers, and enabling native payments. Companies such as JioMart and others let users order and pay on the app, which could accelerate adoption with the right strategies, feels the senior executive quoted above. When a person sends a UPI QR code image or screenshot over WhatsApp chat, the app automatically recognises it and is ready to scan it for payments.

Given the evidence so far, the situation is not likely to turn conducive for WhatsApp quickly. Meta has seen multiple senior executives leaving the company.

"The India team at Meta tried hard to get it done. All systems should work seamlessly to succeed. India is a tough market. You need to spend time, money and resources to win the market and they took the Indian market for granted. Then the bureaucracy brought them down," says one of the executives quoted earlier.