by Charlie Bush
Since the Indian government demanded the demonetisation of old currency notes in November 2016, the sub-continent’s digital payments industry has experienced a meteoric rise, and has become increasingly lucrative. Facebook-owned WhatsApp now appears to be looking to exploit the situation by launching a new P2P payment solution in the country over the next six months.
India seems to be an obvious market for WhatsApp to begin monetizing its vast userbase. The app already boasts 200 million users within India, out of a total 1.2 billion monthly users worldwide, and it is undoubtedly their largest market. Indeed, in a recent statement to TechCrunch, a representative from the company described India as “an important country” and added that “we’re understanding how we can contribute more to the vision of Digital India”. Further suggestions that WhatsApp aims to open a payment service in the country include their advertising in India for a digital transaction lead with experience of UPI, Aadhaar and BHIM.
The Indian government clearly supports this latest venture. WhatsApp co-founder, Brian Acton, made a trip to India in February 2017, and stated that they were already “in early stages” of investigating a service, and was in communication with the government. Reports confirmed that Acton and the Union minister, Ravi Shankar Prasad, met to negotiate commercial messages, and digital transaction features, for the initiative, during which Acton described India as a testing-ground for the business version of the app.
Given the massive size of WhatsApp’s current userbase combined with the enthusiasm Modi’s government has shown for cultivating their country’s digital finance industry, this initiative has the potential to disrupt the domestic payments market hugely. Indians quickly adopted WhatsApp for conducting business such as buying and selling possessions, including medicines, and it is safe to assume they would utilise the app’s new feature for sending and receiving money with even more enthusiasm.  Very quickly, WhatsApp could become the country’s leading domestic digital payments platform, overtaking current primary competitor in the Indian digital payments industry, the country’s largest wallet provider, Paytm, which currently boasts 200 million active users.
After achieving ascendancy in Indian domestic payments, cross border transactions would be the logical next step for the company. The sub- continent is the world’s largest receive market for remittances and so any major attempt to encroach on this territory would make WhatsApp a significant player on the global stage of payments and remittances. Of course, any such predictions depend on the app’s ability to adapt to challenges that face all money transfer operators and payment facilitators, the most formidable of which is the issues surrounding AML/CFT compliance. One key advantage WhatsApp will hold over competitors in overcoming this obstacle is the appropriation of government-backed UPI. Not only does this payments framework enjoy the approval of all major banks, it also ensures security by requiring a one-time configuration of the customer’s bank account, in order to set a PIN that authorises transactions each time.
Furthermore, Facebook already has expertise in this area since it has enabled P2P transfers via Messenger in the U.S. since 2015; has held an e-money license from the Central Bank of Ireland allowing for payment services across EU member states since 2016; and most recently, has registered as an electronic money provider with the Bank of Spain. Evidently they have the experience, the resources and the ambition necessary for serious agitation in this considerable market.
With sufficient investment and a strategic drive to expand the major send corridors to India, WhatsApp could provide serious competition in this booming industry within the next five years. If they can erode the dominance currently enjoyed by established traditional remittance companies and national banks, WhatsApp has the potential to stimulate even lower prices in this lucrative and expanding market.
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