Instant Messaging app WhatsApp is expected to launch a peer-to-peer payment system in India. The interface is likely to be powered with the Unified Payments Interface (UPI) and is expected to launch within six months, as per a report by The Ken (Paywall). This will be WhatsApp’s first global foray into digital payments.
The report also states that WhatsApp, which has no team in India, is looking to hire a “Digital Transactions Lead” to head this initiative in the country.
In a statement to TechCrunch, WhatsApp said, “India is an important country for WhatsApp, and we’re understanding how we can contribute more to the vision of Digital India. We’re exploring how we might work with companies that share this vision and continuing to listen closely to feedback from our users.”
The report comes a little over a month after WhatsApp co-founder Brian Acton’s India visit in February 2017, where he hinted that the company was looking into how it can incorporate payment services. He had also confirmed that time that WhatsApp has crossed 200 Mn monthly active users in India. The company has about 1.2 Bn active users across the globe.
What is interesting is that WhatsApp has decided to go the UPI way for its payment system rather than the more popular digital wallets. This probably has something to do with the RBI issuing stringent guidelines on March 20. The new directive has raised the minimum capital requirement for digital wallet providers by around five times to $3.84 Mn (INR 25 Cr), mandated full compliance with Know-Your-Customer norms, and introduced limitations on domestic remittances. Another proposal on the cards is the requirement for automatic closing of mobile wallets with zero balance.
While the RBI proposes interoperability, which means wallets can interact with each other, there is a belief that the new regulations could raise uncertainties about the future potential of the industry. WhatsApp will be able to avoid these uncertainties by choosing to go the UPI way – a move that is backed by both banks and endorsed by the government.
UPI, WhatsApp, And The India Stack
UPI is basically a one-touch transaction for transferring money between any two parties (merchants, friends, delivery boys among others) using a ‘unique virtual address’ on a smartphone. Once a beneficiary is added to the address, an MPIN (mobile PIN) ensures transaction within seconds. In August 2016, then RBI Governor Raghuram Rajan had unveiled the UPI. The app was launched to help simplify peer-to-peer transactions.
At that time, it was announced that UPI was adopted by 29 banks, 15 of which already have incorporated the app in their mobile-banking system. ICICI Bank, Axis Bank and a few others were among the notable financial institutions to integrate UPI.
In December 2016, Prime Minister Narendra Modi launched the Unified Payment Interface- (UPI) based mobile payment application Bharat Interface for Money (BHIM). Since launch, the app has reportedly witnessed 19.16 Mn downloads. Of these, about 5.1 Mn customers have been able to link their bank accounts to the app.
Interestingly, WhatsApp, in its job posting, states that the Digital Transaction Lead should have the ability to understand and explain UPI, BHIM, and Aadhaar.
This move would allow WhatsApp to revolutionise payments in India just as messaging app WeChat has done in China. Digital payments in India have exploded after the Prime Minister’s demonetisation move last November, which forced many users to switch to digital payments to tide over shortage of cash.
In the last year, several startups launched their mobile apps based on UPI such as Trupay, Razorpay and Flipkart-owned wallet PhonePe. In March 2016, FreeCharge introduced a ‘Chat and Pay’ service that would enable social payments. In October 2016, MobiKwik partnered with ICICI to facilitate payments via UPI. In February 2017, the NPCI launched Bharat QR Code – a quick response code – in association with Visa and MasterCard, to facilitate digital transactions among consumers. The BharatQR code is mandated by the government to enable digital payments without card swiping machines.
Most recently, Sweden-based Truecaller, which counts India as its largest market, also introduced a new UPI-based mobile payment service ‘Truecaller Pay’ last week through a tie-in with ICICI Bank. With low credit card penetration in India and people already using WhatsApp to facilitate ecommerce though it currently doesn’t have any features that support ecommerce formally, this addition of a payments feature could well be just the right move to increase the user base in India but positioning itself at the forefront of the Government-approved digital payment revolution.