S. Sundararajan
Recently, WhatsApp made its much-awaited entry into the digital payments space and the question that existing players are asking is – how will this affect the nation’s digital payments landscape?
The digital payments space in India had a total transactional value of Rs 3,37,267 crore in 2018 and is growing at 17.4 per cent CAGR. Despite this, there still exists a huge portion of smartphone users who are not comfortable or well-versed with using a digital wallet or adopting other digital payments offerings.
Services like WhatsApp can change the dynamics by capitalizing on their existing user base. WhatsApp is already a household name with a captive customer base of over 230 million users in India. These users are open to exploring new innovations within the ecosystem since they already have a considerable amount of familiarity and trust associated with the platform. So, when a service provider like WhatsApp introduces digital payments, adoption rates among its users would be considerably high since there is no learning curve associated with getting familiarised with the platform. And to top that, cheaper smartphones and affordable data packs in India are greatly contributing to further increase the number of people adopting digital payments; thus further driving WhatsApp’s UPI feature into more hands.
The initial expectation is that WhatsApp payments will facilitate peer-to-peer transfers between users on the platform. But with WhatsApp for Business gaining traction, it won’t be long before this feature is rolled out for small and medium business users as well. Such moves will grant more power to the country’s booming SMB space, get more users and services onboard, and disrupt the digital payments space.
A key challenge and a fundamental requirement for all UPI platforms to function in the country is interoperability. This aspect enables anyone with access to a UPI platform to send money to a beneficiary’s account, irrespective of the platform they use. Currently, WhatsApp Pay only allows users to transfer money to other WhatsApp UPI accounts. Failing to adhere to the National Payments Corporation of India’s (NPCI) basic guidelines around interoperability would lead to a backlash from the industry and regulators. Thus, creating a closed ecosystem is unsustainable in the long run for any digital payments service, no matter how many users it may garner. Even WhatsApp, with its deep pockets backed by Facebook’s billions, will be unable to progress in the face of such a situation.
Worldwide, there are several successful examples of communication platforms and utility apps that have introduced payment services to expand their user base. Kakao Bank from South Korea introduced a digital payments platform and gained 3 million customers (around 5% of the country’s population) in just one month. In China, where Alipay owned 80% market share in the payments space, WeChat, another notable messaging platform in China, introduced a payment platform called WePay embedded within its system. Its adoption has been huge and is growing at a phenomenal pace.
For those looking to enter the space, burgeoning their existing users’ trust factor can serve as a source of strength. In WhatsApp’s case, its easy-to-use interface and high-frequency usage will help in replicating its success mantra and maintaining its surge into the digital payments space. The key element here is that if a platform promises to add value, it has the potential to succeed.
The digital payments space in India is undergoing disruption at breakneck speed and fintech players are also exploring the possibility of integrating utility payments into their ecosystems to further drive user engagement. UPI has thus become a major attraction for ecommerce players due to its constantly expanding customer base since it eliminates reliance on liquid cash and boosts financial inclusion. UPI hence stands as a strong contender in transforming the digital payments space and provides FinTech players with an opportune moment to showcase and monetize their offerings.
Today, more than 70 banks already operate on NPCI’s proprietary BHIM platform where more than 151 million people are transacting nearly Rs 1,56,000 crores. UPI’s ease of use makes it an undoubtedly better option than netbanking and card payments, let alone cash, because even digital wallets with all their merits are limited by monthly cash limits and KYC-compliance. The attraction of WhatsApp UPI payments is clear – it democratises digital payments since anyone with a bank account and a smartphone can join India’s digital transformation journey.
So as long as privacy and compliance is upheld, UPI is a public utility that is affordable and relevant for all parties. The market is poised to accommodate new players in this space as they continue their surge towards becoming unified utility providers of a wide gamut of services within a singular ecosystem. WhatsApp has the potential of converting its existing gigantic user base into the Indian digital payments space which is already considered as one of the most competitive and expensive market spaces around the world.
In conclusion, if one were to consider the attention economy where everyone is competing for a user’s time spent on their app/platform, applications with undivided engagement from their users stand to succeed far better than their competitors. By integrating UPI payments into the mix, Fintech companies can open new channels of monetization that would boost India’s digital economy and boost the Government’s activities for improving financial inclusion and transforming India towards a truly digital economy.
(The author is Executive Director, i-exceed - a fintech company with offices in India, Singapore, Dubai, and the US and over 55 customers such as Mashreq, DBS, HDFC, Canara Bank. It helps enterprises digitise with its platform)
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