UPI will gain big if WhatsApp is allowed to take payments live.
The Reliance Jio-Facebook deal can be the beginning of a new chapter in India’s digital payments journey, one that will throw fresh challenges to established players such as Paytm and PhonePe.
Facebook is working on payments through its instant messaging application WhatsApp Pay, which is in a testing stage. Now, with the muscle power and the local knowledge of Reliance, the two sides can hope to bring the payments product to fruition sooner.
“Through this deal what Facebook has bought is an insurance policy, with the support of Reliance it can deal with the regulatory environment in the country better and can hope to go live with WhatsApp Pay sooner,” said a top banker, who spoke on condition of anonymity.
Facebook has bought a 9.9% stake in Reliance Jio for $ 5.7 billion (Rs 43,574) crore, valuing the telecom company at Rs 4.6 lakh crore of pre-money valuation.
Facebook has been doubling down on its interest in the Indian market and is testing a payments product through WhatsApp, which has 400 million users in the country, the most in the world.
Even before the Reliance deal, industry experts said WhatsApp Pay could pose a challenge to Google Pay, Paytm and PhonePe, the three large payment companies in India. Now with the support of Reliance Jio, the social media giant can bring in valid use cases and grow faster.
The big challenge for WhatsApp would be the mandatory data localisation norms of the country, which it was still to adhere to, said the banker.
“The deal could also help Jio Payments Bank which has not managed to show massive adoption among consumers yet, WhatsApp can bring its millions of users rapidly onto the platform along with valid use cases,” he said.
The popularity of the messaging application among every generation and the ease with which one can do transactions through it are the major advantages the platform enjoys.
As per the latest National Payments Corporation of India data, Unified Payments Interface (UPI) has seen 1.2 billion transactions in March, with Rs 2.06 lakh crore being settled through the platform. This number could see a jump if WhatsApp is allowed to take payments live and consumers complete their purchases through the Jio platform.
“Anyway, there was a tremendous competition between three players (Google Pay, Paytm and PhonePe) on QRcode and link-based payments, now WhatsApp Pay will change the way merchant transactions happen,” said a top executive in the digital payments space.
How others stack up
Google Pay offers good insight into consumer behaviour. The payments offering from the search engine giant was an instant hit because of two factors--attractive cashback and ease of use.
Many consumers shifted from PhonePe and Paytm to Google Pay driven by this. If WhatsApp brings the convenience of transactions through a messaging window, Google will have its job cut out to retain customers.
Walmart-owned PhonePe has been building on merchant payment experience to keep its customers together. According to the latest numbers shared by the company, it has around 200 million users and a 10-million merchant network across the country.
It has also built a commerce experience within the app, allowing bus and hotel bookings among others.
WhatsApp Pay could challenge PhonePe in two ways. First, it brings a massive 400 million users in one shot. Second, it will also leverage JioMart for end-to-end commerce experience for the consumer.
Finally, Paytm, the largest digital payments player in the country, has a base of 15 million merchants spread across every corner of the country. It has diversified from its core payments business to selling mutual funds, insurance and overall online shopping experience to customers.
The Jio-Facebook combined strength will have to take on the most valued startup in the country. Being valued at $16 billion, the Noida-headquartered company has the support of Softbank, Alibaba along with T Rowe Price and Berkshire Hathway.
In a recent interview, founder Vijay Shekhar Sharma said he had a runway to survive for the next four years even at the current burn rate. This will be a corporate battle to watch out for, say industry experts.
Catch our entire coverage on the Facebook-Jio Deal here.Disclaimer: Reliance Industries Ltd., which also owns Jio, is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.