WhatsApp Payment feature can disrupt mobile payments space but it still needs to address some issues

After months of anticipation, WhatsApp finally released a beta version (now limited to 1 million people) of its payments feature last month. This development has kicked up a storm in India’s fintech world and ruffled many feathers. India is the first market to get the new WhatsApp Payments feature that allows users to send and receive money. The payment feature has been built using India’s Unified Payment Interface (UPI), currently offered by 71 banks, which means encompassing almost every person with a bank account in India. Just to build some context, UPI is a real-time payments system that enables the digital transaction between banks without the need to input NFSC code or other bank details. Users are required just to make sure that their mobile number is linked to their bank accounts. In other words, players in this space, up until now, were stressed with the rate of change, but the latest perturbance in the force has raked up discussions, some acrimonious but generally constructive. UPI advantage Arguably the most significant advantage that WhatsApp enjoys, even before its official launch, is its humongous active user base (250 million at the last count). Considering that payments are a low margin business, where each individual transaction adds a little as profit, the ability to generate high transaction volumes assumes great importance. WhatsApp is one of the most-used internet platforms in the country with approximately 250 million users in India. This, fundamental difference in terms of usability and, of course, reach is offering a compelling use case for payments, particularly P2P in India. [caption id=“attachment_4391713” align=“alignleft” width=“380”]  Representational image. Getty[/caption] Convenience becomes another major advantage as almost every smartphone user in India is already on WhatsApp. Then there’s an additional advantage of not downloading any other app or even opening multiple windows while using the app. Given the above, it’s anybody’s guess about what WhatsApp Payments could do for digital financial inclusion. What it needs to do While WhatsApp has a bevy of advantages in its stride, there’s still a long way before creating that dent in the payments ecosystem. First, WhatsApp has incorporated payments in its chat application itself. It’s not upfront telling its users what the virtual payment address (VPA) is. This, will have implications in the future, especially, if a non-WhatsApp user wants to raise a collect. Second, payment space (whether P2P or P2M) can be split into three parts; the owner of the transaction, the processor(s) and the entity which controls the money and its flow. Given this framework, WhatsApp controls only the first; the rest are beyond its control. Then the conformance to NPCI guidelines for the full-scale launch might create friction in the UX significantly affecting adoption. Further payments have a different social behaviour than exchanging messages, users might not flock to payments in WhatsApp as they have in sending and receiving messages. Moreover, WhatsApp, currently, is primarily a P2P app, to make a significant dent in the P2M space, WhatsApp will have to acquire merchants which is not only a considerable task but a different ball game altogether. And last, but not the least, mass adoption of UPI and other digital payments are yet to happen, if WhatsApp can address these issues, it might end up disrupting a dynamic market like that of India a second time round. (The writer is CTO and co-founder of EzeTap, a mobile-based payments company. Views expressed are personal)