Facebook-owned messaging platform WhatsApp may soon ask to verify your identity to access the payment feature. WhatsApp pay was launched in 2018 in India as a part of trail run and after getting approval from National Payments Corporation of India (NPCI), the service was officially rolled out to the public last year. Now as per a report by XDA-Developers, the strings in the latest WhatsApp beta indicate that the platform will need to share their verification documents to access the payments feature.
As of now, to use the WhatsApp Pay service in India, you just have to verify the phone number linked to your bank account for UPI transactions. Currently, the platform doesn’t ask for any verification documents from users for any service. According to a report, WhatsApp v2.21.22.6 beta gets new strings that suggest the above mentioned change.
The company has not yet officially made an announcement about this change. Several other popular UPI-based apps such as Google Pay, Phone Pe and others don’t ask users for verification documents. The report suggests that WhatsApp’s move may be limited to business account users only.
The company is constantly working to improvise the ecommerce experience on the platform. Recently, it started to roll out a new feature called ‘Collections’. The feature allows you to shop items from the messaging platform using categories. In simple words, the feature allows business account holders to organise products in their catalogs according to the category so users can easily find the desired item without scrolling through the long list of items.
If you have a WhatsApp business account, you can create a collection by following these steps. Tap on the three dots at the top right corner of the app > tap on Business Tools > select Catalog > tap on Add New Collection. Apart from this, the company released the ‘Carts’ feature that makes it easier for customers to buy multiple items.
Will banking meet the sorry fate of newspapers? With the tech industry creeping up on licensed deposit-taking institutions in India, it’s time to take the question seriously.
Alphabet Inc.’s Google already provides one of the two most popular payment wallets in the country. But now Google Pay wants to push time-deposit products of small Indian banks that don’t have much of a retail liability franchise of their own. According to a press release, Equitas Small Finance Bank will offer Google Pay customers up to 6.85% interest on one-year funds as part of a “branded commercial experience” on the platform. The Mint newspaper, which has reviewed the application interface built by Setu, a Bangalore-based fintech, says other lenders may also sign up.
The move has global significance. It shows the tenuous nature of the hold financial institutions have on a core operation like deposit-taking, and their vulnerability to an assault from online search, social media and e-commerce behemoths. Alphabet, Facebook Inc. and Amazon.com Inc. may pose a far bigger challenge to brick-and-mortar lenders than fintech startups that don’t have the scale of platform businesses. Just like in India, deposit-strapped challenger banks might throw the keys to tech intermediaries with hundreds of millions of active users. When the giants storm the fortress, even larger banks will lose control of banking.
China’s homegrown tech titans have already shown how easy it is to dislodge traditional lenders from lending. In a growing network of users, real-time nonfinancial data can be a more powerful predictive tool than credit scores relied upon by banks. Adding a layer of financial activity to an online platform brings in yet more information. Before Beijing stepped in to clip its wings, Jack Ma’s Ant Group Co. pursued this advantage to the hilt.
Silicon Valley never had a chance in China. However, it’s in a stronger position in the world’s second-most-populous nation, where everything to do with money is increasingly about plugging into an open network. Banks’ historic moat has been breached by tech innovation.
For instance, the government’s digital identification system for 1.3 billion people has made paper trails and physical presence redundant, and turned the banks’ cumbersome know-your-customer processes (verifying an address or being introduced by another account holder) into a cheap utility with standard protocols. A wallet can establish customer identity as easily as a bank and manage the process of seeking her consent.
Nor do India’s deposit-taking institutions have any special advantage left in moving retail money. Yes, they still hold the accounts for sending or receiving funds. But rather than transacting on their bank apps or cards, customers prefer to use Google Pay or Walmart Inc.’s PhonePe to pay one another and merchants. The two wallets were used to transfer 5 trillion rupees ($70 billion) last month, giving the duo an 85% share of a market that has more than 50 apps, including from banks.
That’s the power of platforms’ data-network-activity, or DNA, loop, as researchers at the Bank for International Settlements describe it. When Facebook’s WhatsApp Pay is fully ready, the half a billion Indian users of the messaging service are bound to give it a leg-up in financial businesses.
The environment is ripe for Silicon Valley to encroach into banking. Equitas doesn’t have a pre-existing relationship with the Google Pay customer to whom it’s marketing fixed-term products. Even after getting the money, the lender might not get to build long-term association with the saver. Once the deposit matures, the money will simply get swept back into whichever bank’s account it came from. Since it won’t even take two minutes for a platform to book deposits from scratch, if another lender offers a better deal, idle funds might go there next. Customer loyalty, which is often just plain inertia, will no longer ensure stickiness. Savers will gain.
If the playbook is successful, the likes of PhonePe and WhatsApp Pay might also want to copy it. For a fee, platforms can easily extend their insights into consumer behavior and payment flows to influence deposit mobilization. The higher the commission, the lower the banks’ profit. India’s state-run lenders, in particular, will need to become more efficient. Or they’ll have to lobby with regulators to rein in the tech giants. Amazon, Google and Facebook were all competing to build a brand-new payment network in India, But the central bank has put the license on hold because of data safety concerns, according to a separate report in Mint last week.
Globally, banks and regulators have been bracing themselves for the challenge from Diem, a Facebook-backed project that promises to replicate major global currencies to broaden financial inclusion. But lenders can be on a slippery slope even without new payment instruments. As Big Tech asserts control over the flow of yield-seeking savings, an imposing high-street presence will no longer serve as a ticket to cheap funding.
Regulated institutions may be left holding a license to take deposits — and a thick rule book accompanying that privilege — but platforms will decide if a bank’s promotional offer is to be displayed prominently or buried in an obscure corner. The same slow, painful decline that gutted the print media after readers and advertisers moved online and publishers lost their sway over them may be waiting in the wings for banking, too. (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
Platform banking refers to lenders owning and operating a digital marketplace which allows for its customers to purchase physical goods and transact on non-banking services. Banks have the option of entering into the platform business through several entry levels, including a product, service or payments platform, thereby eventually creating an entire ecosystem of products and services for their customers. According to Infosys Finacle, a platform business is likely to receive a valuation two or three times higher than a linear business.
What are the types of Platform Banking on offer?
There are seven entry points to Platform Banking in India, according to a report by Infosys Finacle, which includes a Product Platform, Service Platform, Payments Platform, Investment Platform, Social Platform, Communication Platform, and a Social Gaming Platform. A Product Platform allows the lender to aggregate products and services sold on other e-commerce platforms, whereas a Service Platform allows one to aggregate service solutions for their customers. A Payment Platform offered generally by all lenders both in India and Globally, for their customers to transact, is a commonly taken avenue by banks to enter platform banking. An Investment platform allows lenders to, with a fee, connect their customers to lenders, whereas a Social Media platform like Facebook or Twitter, would represent a Social Platform. Communication Platforms, which have embedded payment features in them, including the recently launched Whatsapp Pay, serves as an excellent example of Platform Banking. Social Gaming Platforms have been tapped as the emerging field for bankers, to target gamers who trade in virtual currencies.
Are customers interested to use banking platforms for non-banking activities?
According to a Deloitte survey conducted in the United States, a third of retail banking customers were interested towards a platform services offered by their primary lender. 34% of customers surveyed said they were willing to use platform banking services, whilst 25% said they were neutral. 41% of respondents to the survey said they were unlikely to use platform banking services.
Notably, younger customers including both the Gen Z and Millennial customers were most responsive to the idea of a superstore, with a resounding 75% and 67% approval, respectively. 54% Gen X and 33% Boomers showed interest in a financial superstore app, whilst on a cumulative level, 55% of all respondents had shown interest in the India.
There has also been little marketing buzz around the payment feature and, not to forget, a majority of WhatsApp’s 400 million-strong user base in India lacks access to it.
Unified Payments Interface (UPI) transactions through WhatsApp remained tepid in March, four months since the feature went live for 20 million users on the messaging app. Despite early predictions that payments via the messaging app would explode once the feature went live, WhatsApp accounted for only 0.02% of UPI volumes and 0.01% of transaction value.
Industry executives FE spoke to said that the limited number of transactions might be attributable to the fact that the Facebook-owned company may not have begun implementing its plans for payments. “They haven’t quite given it a push, at least not yet,” a senior executive with a private bank said on condition of anonymity.
What this means is that they have not aggressively started acquiring merchants to enable peer-to-merchant (P2M) transactions. There has also been little marketing buzz around the payment feature and, not to forget, a majority of WhatsApp’s 400 million-strong user base in India lacks access to it. The company does have about 15 million users on its WhatsApp for Business app, designed specifically for the kirana shop owner. In 2019, the company released catalogues for shop owners to showcase their products to their customers and in 2020, it added more new features to the business app.
An email seeking a response from WhatsApp India on its payments strategy remained unanswered till the time of going to press. In December, the company had announced its plans to enable the sale of “sachet-sized” health insurance products through its platform. The messaging giant is also running pilots in the areas of micro-pension, edtech and agritech, said Abhijit Bose, head of WhatsApp India, speaking at Facebook’s Fuel for India event.
While State Bank of India (SBI), HDFC Bank, ICICI Bank and Axis Bank are WhatsApp’s partners in payments, in the pension and insurance space, the company would be partnering with pinBox Solutions, HDFC Pension Management Company and SBI General Insurance. “WhatsApp has proactively been working on several pilots to help ensure that every adult has access to the most basic and critical financial livelihood services through their mobile device. By the end of this year, we expect that people will be able to buy affordable sachet-sized health insurance through WhatsApp,” Bose had said, adding that the company is also working on pension services for the informal sector in India.
In February 2018, when WhatsApp had gone for a beta launch of its payments facility for 1 million of its 230 million users, Credit Suisse had said that the feature could lead digital payments “to explode” and grow the size of the market to US$1 trillion over a five-year horizon.
In March 2021, PhonePe led the UPI market, processing 44% of all transactions on the channel and crossing the 1 billion-transaction mark during the month. It was followed by Google Pay and Paytm.
The gap between the top three UPI apps and WhatsApp Pay is quite epic.
It took a good over a two-and-a-half-year period for Facebook-owned WhatsApp to roll out its much talked about payments service in November 2020 from around February 2018 when the messaging giant had started testing the feature. In October 2020, a month before the rollout, WhatsApp Payments or WhatsApp Pay had processed 70,000 UPI transactions amount to Rs 9.32 crore. In its first month (November) of approval from the National Payments Corporation of India, which operates the UPI payments infrastructure, the figures jumped to an impressive 3.1 lakh transactions worth Rs 13.87 crore. However, the growth, in transactions primarily, since its launch till February 2021 arguably hasn’t picked the kind of pace one would have expected from WhatsApp that counts over 500 million users in its biggest market India. As per NPCI data, WhatsApp managed to scale to 5.5 lakh UPI transactions worth Rs 32.41 crore in February.
“The reason is very clear. It is the lack of use cases. Right now, WhatsApp is offering peer-to-peer (P2P) payments. There is no geography where just on the back of P2P payments, digital payments have proliferated. They don’t have those P2M transactions or use cases defined really well,” Arnav Gupta, an analyst at Forrester Research told Financial Express Online.
WhatsApp didn’t reply to an email seeking comments for this story.
The Roadblock
While the company has been studying the digital payments market for at least three years, the business side of the platform has been a roadblock for the company as WhatsApp hasn’t been able to further evolve it and connect it back to payments proposition. For example, Gupta said that WhatsApp is only a unilateral channel of communication for enterprises to speak to their customers. For instance, a travel portal can send a customer’s travel tickets and invoice on WhatsApp but he/she cannot talk back to the company while there are very few and limited use cases where there are chatbots set-up. According to Gupta, that is the struggle WhatsApp is going through.
WhatsApp’s viral growth and the kicking off of its networking-effects in the early days was certainly the stuff of legend. However, that has not translated yet in its payments business that has been approached in fits and starts. “WhatsApp’s desire to keep its interface consistent across geographies meant it was unable to create a dedicated payments interface within the app for India despite the exploding UPI market. This means it lags in a market it could have clearly dominated. Even when we look at the data in the past three months, its transactions have fallen in January 2021 from a December 2020 high,” Utkarsh Sinha, Managing Director, Bexley Advisors, a boutique investment bank firm, told Financial Express Online.
Importantly, WhatsApp Pay rollout had coincided with the NPCI announcement in November that third-party applications offering UPI payments service can process a maximum of 30 per cent of the transaction volumes starting January 1, 2021. The decision, according to an NPCI statement, was taken to “address the risks and protect the UPI ecosystem as it further scales up.” Moreover, NPCI had allowed WhatsApp to launch payments service in a graded manner to a maximum of 20 million registered users in UPI.
“Limiting the number of digital payments that could be made via payment apps adversely affected all other wallets, including WhatsApp,” Prabir Chetia, Head – Business Research & Advisory, Aranca told Financial Express Online. Moreover, the entire payment section had a step-by-step launch with no marketing push. “There was no big bang marketing campaign to announce its entry into the payment space. Hence, the awareness regarding this new offering of WhatsApp is very low. Consumers who are tech-savvy and active users of the app may know about it and even use it, but many others still view it as a communication tool,” added Chetia.
Missing the Bus
The thought perhaps at WhatsApp back in 2017 was about leveraging the customer loyalty for its messaging environment to plug-in the payments service. This would have meant for customers to remain within WhatsApp instead of exiting it and using Paytm, PhonePe, Google Pay, others for transacting online. However, a nearly three-year long period from testing the service to its eventual launch has perhaps impacted its growth. “Had they been able to launch then (in 2018), they would have evolved like others. They have missed the bus by over two years. Having said that, their partnership with Jio could be a potentially viable business model and can create some buzz. But JioMart is not available on WhatsApp in all the cities currently,” said Gupta.
In April 2020, Facebook had picked up a 9.99 per cent stake in Jio Platforms at $5.7 billion. The deal had supporting India’s vast small business base digitally as its key focus. Moreover, Mark Zuckerberg at a company event in December 2020 with Mukesh Ambani had revealed that WhatsApp has 15 million business app users from India. “Jio brings digital connectivity, WhatsApp now with WhatsApp Pay brings digital interactivity, and the ability to move to close transactions and create value, and Jio Mart brings the unmatched online and offline retail opportunity, that gives our small shops which exist in villages and small towns in India, a chance to digitise and be at par with anybody else in the world,” Ambani on his part had said. Jio and WhatsApp have more than 400 million customer base in India.
“WhatsApp has been ironing out its strategy for the space since 2017. But that has led it to concede valuable space to the current incumbents. If WhatsApp was aggressive in payments to start with, a lot of the current competition would have struggled to gain a foothold,” said Sinha.
The Epic Gap
Current UPI payments incumbent PhonePe had cornered an impressive 42.5 per cent share of the 2,292.90 million UPI transactions in February, as per NPCI data. Walmart’s payment arm in India – PhonePe had processed 975.53 million UPI transactions amounting to Rs 1.89 lakh crore. Likewise, Google Pay, which lost the top spot to PhonePe in December 2020, was the second-largest UPI app in February processing 827.86 million transactions (36 per cent of total UPI volume) worth Rs 1.74 lakh crore. On the other hand, Paytm was still the distant third player in February recording 340.71 million transactions involving Rs 38,493.52 crore. It had processed 332.69 million transactions worth Rs 37,845.76 crore in the preceding month.
The gap between the top three UPI apps and WhatsApp Pay is quite epic. “WhatsApp has a huge user base. However, these users are using it as a communication tool. Will they become loyal to its payment solution? I think it is unlikely,” said Chetia. Despite a large user base, those living in Tier-III cities and beyond are less likely to use WhatsApp for payments. That’s also because, unlike its large competitors, WhatsApp doesn’t offer cashback and other add-on services as incentives. “Even if they build out certain use cases, still daily active users on other platforms are far too much. So, I don’t think WhatsApp would be in a leadership position,” said Gupta. However, it might be too early to call any winners in the UPI space. WhatsApp still owns the Bharat behind India, and their entry is a significant tectonic shift that might unlock a lot of disruptive value in the long term. It is precisely because of their scale that this value potential exists.
UPI is currently the biggest among the NPCI operated systems including NACH, IMPS, AEPS, BBPS, RuPay, etc.
UPI transactions ended 2020 on a high note. The value for digital transactions done via UPI stormed past the Rs 4-lakh-crore mark in December, according to the latest UPI data from the National Payments Corporation of India (NPCI). 2.23 billion transactions worth Rs 4.16 lakh crore were recorded in December, up from 2.21 billion transactions involving Rs 3.91 lakh crore in November. The year-on-year growth in volume stood at 70 per cent from 1.30 billion transactions while the value of UPI transactions increased 105 per cent from 2.02 lakh crore in December 2019. Moreover, the number of banks live on the UPI platform increased from 143 to 207 during the 12-month period.
Among the leading UPI players, Google Pay and PhonePe had together cornered over 82 per cent of the market by volume and over 86 per cent by value in November. While Google Pay processed 960.02 million transactions involving Rs 1.61 lakh crore, PhonePe, saw 868.4 million transactions worth Rs 1.75 lakh crore. Paytm had processed 260 million payments.
The transaction volume and value have apparently scaled up faster during the Covid and lockdown phases as people switched to digital mode to avoid cash usage. The volume jumped by 908.47 million transactions during the 10-month period from 1.32 billion transactions in February 2020, according to the analysis of NPCI data. However, in comparison, similar volume growth of 908.47 million transactions, before Covid, took 17 months (from September 2018) to reach the February 2020 level.
UPI is currently the biggest among the NPCI operated systems including NACH, IMPS, AEPS, BBPS, RuPay, etc. As of October FY21, out of 3.39 billion retail transactions on all NPCI platforms, 2.07 billion transactions were recorded on UPI followed by 340.03 million transactions with respect to NFS inter-bank ATM cash withdrawals, 318.97 million transactions on the instant payment inter-bank electronic funds transfer system — Immediate Payment Service (IMPS), and 245.55 million transactions on the National Automated Clearing House (NACH), according to the NPCI data.
Importantly, the Reserve Bank of India had on Friday launched a ‘composite Digital Payments Index (DPI)’ to measure the extent of digitisation of payments in India based on parameters including payment enablers, payment infrastructure – demand-side and supply-side factors, payment performance, and consumer centricity, according to the RBI.
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