WhatsApp Payments will impact home-grown players but existing customers won't switch to it easily, say experts

One of the reasons that digital payments have not really gone by beyond the billion mark is because people have moved back to using cash as it is back in the system.

From sending messages to even ordering groceries from your local grocer on WhatsApp, the most often used chat platform is now planning to come out with a digital payment feature which it makes easier to do payments from one user’s bank account to another. The digital payment feature in the platform is still in the testing phase and will be officially rolled out to over 200 million Indian users in the days to come.

WhatsApp has an advantage over the other players in the digital payments ecosystem because it is the app of choice for 96 percent of smartphone users in the country as a communication app. This was revealed by Jana, a startup that offers an app marketplace to provide free data to users in developing countries, the Hindu reported. WhatsApp is installed in 1.7 times more devices than Facebook Messenger and 2.3 times more than home-grown messaging app, Hike, the report said.

The WhatsApp account will use the Unified Payments Interface (UPI) enabling users to make payments from their bank accounts. UPI is a real-time payments system developed by the National Payments Corporation of India (NPCI) that enables digital transactions between banks. WhatsApp digital payments will also include support by a number of banks, such as the State Bank of India, ICICI Bank, HDFC Bank, and Axis Bank, IANS reported.

In order to configure the feature, users must first verify their phone number via SMS and then choose a bank. After the completion of the configuration, the option to send a payment becomes available.

The WhatsApp app logo, WhatsApp

The WhatsApp app logo, WhatsApp

So what does WhatApp Payments entry bode for existing digital payment players? Think Google Tez, Paytm, PhonePe and others. Sachin Seth, Partner, Financial Advisory Services, EY, said that the impact of WhatsApp on the digital ecosystem would be significant and also on other players using UPI as a payments platform. With WhatsApp having the most adoption, penetration and ease of use among the population even in Tier 2 and 3 cities, he says it becomes ‘friendly’ for users who are already used to messaging and chatting on it.

The digital payment ecosystem has not been able to gain much currency in India though it got a fillip post-demonetisation when people were forced to use it as they could not access cash easily. However, the ecosystem has two issues, namely of adoption and literacy.

There are still a large number of people who do not understand how to use the various platforms available for making digital payments like Aadhaar Pay, BHIM, UPI wallets or for that matter even apps that their banks have installed, says Seth. Adoption is limited to the number of apps that are downloaded which remains the bank app, payments app or wallet. It is in this scenario, says Seth, that WhatsApp scores over others as with 200 million users already using it, to cross over to making payments becomes easier as they are familiar with WhatsApp, he said.

WhatsApp is used by a large age-group between 16 or 18 through to 65 year old. Even those who still continue to use a Western Union or a bank account to transfer money are familiar with WhatsApp. Like Rajesh V, a driver with a corporate firm. He said that he uses WhatsApp to talk to his family back in central India and shares pictures and also receipts of payments sent to them. However, he is diffident about using a digital payment app even though he is adept at using his smartphone. “I am worried that I may lose my hard-earned money,” he said. However, he is open to using WhatsApp digital payment system when it is launched as he is ‘knows’ the app. It is this comfort of a layman or a tier 4 or 5 city individual that makes its users open to digital payments through WhatsApp.

WhatsApp foray into payments is going to usher is new era, said Jose Thattil, CEO, Phi Commerce. "Unlike other payment apps, which require a download, payments via WhatsApp does not require an additional download and installs as users are already actively using WhatsApp and are completely at ease using the app. As more and more users get hooked onto to WhatsApp based UPI payments, Facebook will need to deploy bank level customer service as unlike chatting, consumers will need quick redressal of any complaints or queries for payments made via WhatsApp," he pointed out

A few players like Paytm for instance, have first-mover advantage in the digital payments arena offering payments, banking, lending and insurance. It also offers mobile recharges, bill payments, utility payments, entertainment and travel booking among other services. The Paytm wallet, which is currently the largest digital wallet with over 300 million users and is accepted by over 6 million offline merchants across India.

Though UPI payments have been successful with a few digitial payment players like PhonePe, Paytm and others, the bottom of the pyramid users in tier 3 and 4 cities have not been using it, says industry experts, as they are unaware about how to use it. There is not much awareness created yet, though the government has been talking about a cashless economy. Another reason is that cash is back in the system. “The rise in digital payments is not due to people’s tendency to be loyal to one or the other digital payment player. Rather, it was the compulsion to get on to the digital mode with less cash on hand. However, with cash back in the system, people have again resorted to making cash transactions,” said Sanjay Khan Nagra, senior associate, Khaitan & Co.

This explains why digital payments are still way below the government’s stated goal of hitting 25 billion digital transactions by this fiscal-end. As per the Ministry of Electronics and IT (MeitY) data, only 14.8 billion digital transactions were undertaken across India from 1 April to 28 January, a report in the Economic Times said.

WhatsApp’s USP is its ease-of-use. But it will have to ensure and assure security and confidence to its users, said Paula Mariwala, executive director, Seedfund and Founder and Co-President, Stanford Angels and Entrepreneurs India. “It will interesting to watch how WhatsApp will revolutionise the digital payments ecosystem. It is available in your fingertips. But home-grown players will be impacted by its entry and aslo because its users are many and hence the app does not have to be downloaded. But users of other apps for digital payments won’t easily migrate to WhatsApp. However, onboarding new users will be easy for WhatsApp,” she said.

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