WhatsApp’s payments platform is far behind rivals on transaction front, the company says slow start part of ‘strategy’
What’s up with WhatsApp, specifically its newish payments business? Contrary to expectations of many market observers, WhatsApp has processed just 1.6 million of the over 6.7 billion transactions on India’s Unified Payments Interface (UPI) since its launch in November.
WhatsApp insiders say this is part of its strategy. “We are in it for the long haul; it’s a marathon not a sprint and we are in no hurry and want to get this piece right,” a person close to the company told ET, requesting anonymity as they are not authorised to speak with the media. “To get the simplicity of WhatsApp’s interface for payments is a complex task. We want to ensure that the experience for customers is smooth.”
Market observers say the challenge of India’s sophisticated payments architecture, a raging political debate around ownership of digital data, coupled with the social messenger’s global experiences such as in Brazil could be the reasons. Within a few days of WhatsApp’s payment service going live, the central bank of Brazil had taken it down owing to an uncertain regulatory climate.
A WhatsApp spokesperson confirmed the development. “That’s correct,” the spokesperson said, responding to ET’s mailed query on whether the slow start was a conscious decision to enhance customer experience before gaining scale.
As per latest data released by the National Payments Corporation of India (NPCI), WhatsApp Pay processed just 0.56 million transactions worth Rs 36.44 crore in January 2021 against 0.81 million transactions worth Rs 29.72 crore it recorded in December 2020.
Graphic: Rahul Awasthi
At the same time, the NPCI-run UPI yet again clocked record volumes processing 2.3 billion transactions worth Rs 4.3 lakh crore in the month cementing its credential as one of the fastest-growing retail payment channels in the world.
“We have knowingly gone slow with onboardings and are working on building the right technology and teams to emerge as an important player in enabling India’s digital ecosystem,” the person close to WhatsApp quoted above said, adding: “If we want, we can be a much larger player in the market; we haven’t started any marketing at all.”
Walmart-backed PhonePe, Google Pay, Paytm that is funded by SoftBank and Ant Financial and Amazon Pay cornered a significantly higher share of transactions in this period. PhonePe clocked 968 million transactions in January whereas Google Pay processed 853 million payments. Paytm came a distant third with 281 million payments on UPI whereas Amazon Pay did 46 million.
“WhatsApp wants to get the payments absolutely right in India because it ties together all its longer-term ambitions for growth in the country,” said a chief executive of a domestic payments company, speaking off the record.
“Payments are all about trust and simplicity. Perhaps, they are waiting for a better time to scale this service because as we know the political climate is not conducive for WhatsApp and other Big Tech players in the market in India just like so many other jurisdictions in the world,” the person added.
WhatsApp Pay went live in India in November after months of facing regulatory hurdles and courtroom battles. NPCI has allowed only 20 million of its over 450 million users to avail the service. The nod also came with a separate circular that put a 30% cap on transaction volume for third-party apps using the UPI network. Moreover, in its current form only peer-to-peer (P2P) transactions are allowed.
These steps were taken largely to allay fears of several regulatory authorities including the RBI over potential monopoly risks.
According to Deepak Abbot, co-founder of fintech company Indiagold, the staggered and slow growth of WhatsApp’s India payment service could be on account of a competitive marketplace and the platform itself being uncertain of its goals for the India market.
“I would assume they’d wait for some of the restrictions on onboardings to be lifted before they try to acquire more customers. This will ensure a low rate of transaction failure, where the intended beneficiary is also on the same pay platform. With current restrictions, they cannot mirror the strategies adopted by Google or Paytm in their early days,” Abbot, an-ex Paytm executive and a prominent payments industry commentator said.
Experts also pointed that WhatsApp’s bid to capture the digital payments market in India has also not been sufficiently focused on the technology and talent acquisition front.
“I feel WhatsApp in India needs to get three things right to meaningfully scale their payments business — frugal technology-led innovation that is solving real problems for consumers, a payments-focused team and an advisory network that consists of network partners in touch with regulatory complexities of the country… they must invest in the right talent,” said Srinath Sridharan, a fintech industry expert and a visiting fellow at ORF.
WhatsApp is learnt to be building a team for scaling its payments business and is in the process of hiring a payments head for its India operations. The company is currently working on pilots of SBI General Insurance and HDFC Pension Management Company on micro-financial products.