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WhatsApp Pay hasn’t exploded yet in its biggest market – India

In October 2020, a month before the rollout of WhatsApp’s much talked about payment service - WhatsApp Payments or WhatsApp Pay, they had already processed 70,000 UPI transactions that amount to Rs 9.32 crore. In its first month (November) of approval from the National Payments Corporation of India (NCPI), 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.

What were the roadblocks that prevented WhatsApp Pay from becoming the digital payment giant that was expected at the outset of its rollout in 2020?

WhatsApp has been relegated to being just a communication tool owing to a couple of reasons. Its humungous growth in its initial stages in India was legendary. But it couldn’t evolve its business side as proliferate as its networking for communications side.

"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.

Gupta further elaborates that WhatsApp’s struggle is also a result of its one-sided channel of communication for enterprises to speak to their customers. For instance, a customer may receive travel tickets and invoices on WhatsApp from a travel portal but cannot interact from their end, and also the negligible instances where chatbots are set up is a huge obstacle.

As per Utkarsh Sinha, Managing Director, Bexley Advisors, a boutique investment bank firm, told Financial Express Online, "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."

WhatsApp Pay Rollout Coincided with the National Payments Corporation of India (NCPI) Announcement

In November, around the same time that WhatsApp Pay was introduced in India, the NCPI announced that third-party applications offering UPI payments service can process a maximum of 30 percent 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.

Joined the Race a bit too late

The entire idea behind WhatsApp Pay was to leverage the existing user base to channel into its payment service feature. But its nearly three-year-long period from testing the service to its eventual launch has perhaps impacted its growth. "WhatsApp has been ironing out its strategy for space since 2017. But that has led it to concede valuable space to the current incumbents – PhonePe, GPay, Paytm, etc. If WhatsApp was aggressive in payments to start with, a lot of the current competition would have struggled to gain a foothold," said Sinha.

Gupta says, "Had they been able to launch then (in 2018), they would have evolved like others. They have missed the bus for 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.”

In April 2020, Facebook and Jio joined hands wherein, Facebook picked up a 9.99 percent stake in Jio Platforms at $5.7 billion. The key focus of the deal was to support India's vast small business base digitally. At a company event in December 2020 with Mukesh Ambani, Mark Zuckerberg 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 digitize 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 bases in India.

Huge gap in the Transaction statistics between WhatsApp Pay and its other Incumbents

Current UPI payments incumbent PhonePe had cornered an impressive 42.5 percent 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 percent 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.

This colossal gap between the top three UPI apps and WhatsApp Pay raises the improbability of WhatsApp Pay garnering a comparable customer base. "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 may not use WhatsApp for payments. Why? 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.

Source: https://www.msn.com/en-in/news/financenews/whatsapp-pay-why-facebook-owned-messaging-service-hasnt-exploded-yet-in-its-biggest-market-india/ar-BB1eXJ8v

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